New seeds - Motilal Oswal

2 January 2009India StrategyInflationhyperinflation to deflation2008 - the worst recordedyear for Indian equitiesInstitutional investmentsforeign to domestic3QFY09 - first quarter ofearnings declineCommodity pricespeaks to troughsTrend of performancedivergence continuesMarkets discountingalmost no-growthscenario for FY10Interest ratesnew highs to new lowsDespite significantdowngrades, earningsCAGR of 8% likely overFY08-10Key themes to play in2009 - abundant liquidity,low interest rates,falling commodity pricesLiquiditycrunch to surplusEarnings growthbroadbased to selectiveRESULTS PREVIEWQuarter ending December 2008Prices as of Wednesday, 31 December 2008New seedsResearch Team (Rajat@MotilalOswal.com)

Results PreviewContentsIndia Strategy 3-501. Automobiles 51-62Bajaj Auto 58Hero Honda 59Mahindra & Mahindra 60Maruti Suzuki India 61Tata Motors 622. Banking 63-88Andhra Bank 71Axis Bank 72Bank of Baroda 73Bank of India 74Canara Bank 75Corporation Bank 76Federal Bank 77HDFC 78HDFC Bank 79ICICI Bank 80Indian Bank 81Indian Overseas Bank 82J&K Bank 83Karnataka Bank 84Oriental Bank 85Punjab National Bank 86State Bank 87Union Bank 883. Cement 89-103ACC 97Ambuja Cement 98Birla Corporation 99Grasim Industries 100India Cements 101Shree Cement 102UltraTech Cement 1034. Engineering 104-117ABB 109Bharat Electronics 110BHEL 111Crompton Greaves 112Cummins India 113Larsen & Toubro 114Siemens 115Suzlon Energy 116Thermax 1175. FMCG 118-138Asian Paints 127Britannia Industries 128Colgate Palmolive 129Dabur India 130GSK Consumer 131Godrej Consumer Products 13231 December 2008Hindustan Unilever 133ITC 134Marico 135Nestle India 136Tata Tea 137United Spirits 1386. Information Technology139-153HCL Technologies 146Infosys 147MphasiS 148Patni Computer 149Satyam Computer 150TCS 151Tech Mahindra 152Wipro 1537. Infrastructure 154-165BL Kashyap 158Gammon India 159Hindustan Construction 160IVRCL 161Jaiprakash Associates 162Nagarjuna Construction 163Patel Engineering 164Simplex Infrastructure 1658. Media 166-176Deccan Chronicle 171HT Media 172Jagran Prakashan 173Sun TV Network 174TV Today 175Zee Entertainment 1769. Metals 177-190Hindalco 183Hindustan Zinc 184Jindal Steel 185JSW Steel 186Nalco 187Sterlite Industries 188SAIL 189Tata Steel 19010. Oil & Gas 191-208BPCL 199Cairn India 200Chennai Petroleum 201GAIL 202HPCL 203IOC 204Indraprastha Gas 205MRPL 206ONGC 207Reliance Industries 20811. Pharmaceuticals 209-229Aventis Pharma 215Biocon 216Cadila Healthcare 217Cipla 218Dishman Pharma 219Divi’s Laboratories 220Dr Reddy’s Labs. 221GSK Pharma 222Glenmark Pharma 223Jubilant Organosys 224Lupin 225Piramal Healthcare 226Ranbaxy Labs. 227Sun Pharmaceuticals 228Wockhardt 22912. Real Estate 230-240DLF 239Unitech 24013. Retailing 241-246Pantaloon Retail 245Titan Industries 24614. Telecom 247-258Bharti Airtel 256Idea Cellular 257Reliance Communication 25815. Textiles 259-267Alok Industries 264Arvind Mills 265Raymond 266Vardhman Textiles 26716. Utilities 268-277CESC 273NTPC 274PTC India 275Reliance Infrastructure 276Tata Power 27717. Others 278-283Blue Star 278Bombay Rayon 279Everest Kanto Cylinders 280Great Offshore 281Greaves Cotton 282United Phosphorus 2832

India Strategy2008: worst year for Indian equities2008 (CY08) has been a year of big disappointments. The BSE Sensex declined from anall-time high of 21,206 in January 2008 to a low of 7,698 in October 2008. Double-digitinflation, high interest rates, collateral impact of global developments, and corporate earningsdowngrades collectively contributed to the disappointments. Though in the last two monthsof CY08, interest rates have eased led by improved liquidity and equities have bouncedback led by abatement in FII selling, the damage during the year was significant enoughfor CY08 to go down in history as the worst year for Indian equities.Biggest negative return for Sensex in three decadesThe BSE Sensex dropped 52% in CY08, the biggest negative return in three decades(since 1980). The bull-run started in CY03 and delivered a CAGR of 43% in BSE Sensexover the subsequent five years ending CY07. The CY08 closing Sensex level of 9,569 isclose to the end-CY05 level of 9,398.BSE SENSEX DELIVERED ITS BIGGEST NEGATIVE RETURN SINCE 1980105Sensex Annual Return (%) - LHSSensex - RHS30 Yr CAGR (1979-2008) : 16.4%10 Yr CAGR (1998-2008) : 12.2%5 Yr CAGR (2003-2008) : 10.6%Bull Run CAGR (2002-2007) : 43.1%22,0006516,5002511,000-155,500-55198019811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720080CLASSIFICATION OF SENSEX ANNUAL RETURNS (%) SINCE 1980Positive Years: 21 (72%)2004 13Negative Years: 8 (28%)2002 41997 192001 -18 1994 17 2007 472000 -21 1993 29 2006 471998 -16 1989 17 2005 421996 -1 1984 7 1992 37 2003 731995 -21 1983 7 1990 35 1999 641987 -16 1982 4 1988 51 1991 822008 -52 1986 -1 1980 25 1981 54 1985 94Year % Year % Year % Year % Year %-30 to -60 -30 to 0 0 to 30 30 to 60 >60Percentage Total Return RangeNote: Returns for calender yearsSource: Bloomberg/MOSL31 December 20084

India StrategyMarket decline in 2HCY08 more severe than 1HFY08The annual decline of 52% for BSE Sensex in CY08 was almost equally spread betweenthe two halves. Barring 1HCY04 (election results in India were contrary to marketexpectations), when markets declined 18%, no half has seen a decline in the last six years.The market decline in 2HCY08 was more severe, as it followed a 34% decline in 1HCY08.Moreover, the decline in 2HCY08 happened in an environment of significant downgradesin growth rates for the Indian economy and corporate sector earnings.1HCY08 FALL WAS GREATER THAN 2HCY08, HOWEVER 2HCY08 FALL MORE SEVERE, GIVEN 1HCY08 FALL22,00018,500Sensex return Points % Fall1HCY08 6,839 34%Sensex return Points % Fall2HCY08 3,814 28%15,00011,5008,000Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-0880%40%0%Since CY02, 2H market returns have been higher than 1H, except CY08,when market gave negative return both in 1H and 2H-1 4 762389311330638-40%-18-34 -281HCY022HCY021HCY032HCY031HCY042HCY041HCY052HCY051HCY062HCY061HCY072HCY071HCY082HCY08Source: MOSLSome respite in the last two monthsThe market decline began from January 2008, led by valuation concerns. As crude pricesand global commodities made new highs, in turn driving inflation and monetary tightening,equities as an asset class went out of favor. The fall got magnified in the wake of globalcrisis, with the collapse of several global financial institutions and freeze of credit markets.Finally, the corporate earnings upgrade cycle turned into a cycle of downgrades driven bysharp fall in commodity prices, slowdown in demand, rising interest cost, etc. The keypositive towards end-CY08 has been a sharp drop in inflation and interest rates. The RBIhas also responded well by following an easy monetary policy.31 December 20085

PERFORMANCE OF SENSEX IN CY08 AMID NEWS FLOWS22,00018,50015,00011,5008,0001-Jan-08Reliance PowerIPO Closed21-Jan-0810-Feb-08Budget 2009, FarmLoan Waiver1-Mar-0821-Mar-08Fiscal measuresto curb inflation10-Apr-0830-Apr-0820-May-08Fuel PriceHike9-Jun-08Bond Yield riseto 7 year highLeft parties withdraw supportto UPA government29-Jun-0819-Jul-088-Aug-08Lehman Brothersfiles for bankruptyBailout packageapproved by USMonetary policyeasing begins28-Aug-08Infosys SlashesGuidance17-Sep-087-Oct-08IIP Growth shows -vefirst time in 15 years27-Oct-08Terror attackon Mumbai16-Nov-08Bond Yield atfour and halfyears Low6-Dec-0826-Dec-08Source: MOSL/IndustryIndia: an outperformer during CY02-08In CY08, India has underperformed most of the global markets. However, over the last sixyears (period of bull-run), India has still outperformed all the markets, except Brazil. Whilethe Indian and Brazilian markets have delivered superior double-digit growth, the otheremerging markets have delivered single-digit growth over CY02-08. The developed marketsof US and Japan have been flat over this period.RELATIVE PERFORMANCE OF INDIA V/S REGIONAL PEERS-85-70-55-40-25-72-65-52-48Russia China India HongKongIndia has underperformed mostof the global markets in CY08-42 -41 -41-38Japan Brazil Korea USSENSEX HAS DELIVERED 2 ND HIGHEST RETURN CAGR OVER CY02-08AMONG EMERGING MARKETS25201510502219However, India continues tooutperform global markets bya wide margin since CY0210 10Brazil India Korea Russia HongKong851 0China Japan USSource: Bloomberg/MOSL31 December 20086

India StrategyLeaders and laggards for CY08Based on Sensex performance as the benchmark, we notice that DLF (down 74%) topsthe list of market underperformers for CY08, followed by SAIL (73%), RelianceCommunications (70%), ICICI Bank (64%), and L&T (63%). Also, in the 10 worstperformers, the key sector representations are Metals (4), Real Estate (2), Capital Goods(2), Autos (1), and Infrastructure (1).Among the top-10 outperformers, only HUL and Hero Honda have delivered positivereturns of 18% and 17% respectively.TOP OUTPERFORMERS AND UNDERPERFORMERS FOR CY08 (% RETURNS)-75Top market underperformers in CY08Top market outperformers in CY08-50(74) (73) (70) (64) (63) (61) (57) (56) (56) (52) (48) (47) (46) (42) (42) (37)(28) (28)(18)15 17-25025DLFS A I LR-CommICICI BankL&TRPLReliance Inds.TCSWiproNiftyH D F CB H E LO N G CSBIHDFC BankInfosysBhartiNTPCITCHero HondaHind. UnileverSource: MOSLTOP OUTPERFORMERS AND UNDERPERFORMERS FOR CY02-08 (% RETURNS)105707835058 5640 39 39 3731 30 29 28 27 25 21 20 19 18 16 11 5-3-35Bharti AirtelB H E LLarsen & ToubroS A I LPunjab Natl BankSun Pharma.Tata Power Co.Reliance Inds.St Bk of IndiaHDFC BankGAIL (India)H D F CITCICICI BankHero Honda MotorO N G CNiftyTata SteelInfosys Tech.Hind. UnileverWiproSource: MOSL31 December 20087

India StrategySECTORAL PERFORMANCE FOR CY02-08 (% RETURNS)SECTORAL PERFORMANCE FOR CY08 (% RETURNS)4841-100-82-74 -72 -65 -60 -57 -55 -52 -52 -51 -50362428 262220 1917 16 16 15-75-50-33120EngineeringOilBanksPSUMetalSensexCons.DurableFMCGAutoPharma5IT-250Real EstateMetalCons.DurableEngineeringUtilitiesAutoOilSensexBanksITPSUPharma-14FMCGSource: Bloomberg/MOSLInflation made a new high, while the rupee hit new lowsInflation touched 12.1% in September 2008, the highest since CY03. Rising inflation andtightening credit by RBI led to increase in G-sec yields to 9.3% in June-September 2008.RBI measures coupled with FII outflows led to the rupee hitting a new low (since 1999)of Rs50/US$.INFLATION (%)17.013.09.05.01.016.412.22.9Dec-90Dec-91Dec-92Dec-93Dec-94Dec-95Dec-96Dec-97Dec-98Dec-99CY06 : 5.9%CY07 : 3.8%CY08 : 6.4%8.61.38.712.46.43.3 3.1Dec-00Dec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07Dec-085545352515RUPEE-DOLLAR RATE (RS/US$)Dec-90Year Rs/$ +/- (%)CY06 : 44.3 (1.8)CY07 : 39.4 (11.0)CY08 : 48.8 23.8Dec-91Dec-92Dec-93Dec-9436.4Dec-95Dec-96Dec-97Dec-98Dec-9946.7Dec-00Dec-01Dec-02Dec-0343.6Dec-0446.5Dec-05Dec-06Dec-0748.839.4Dec-08Source: Bloomberg/RBI/MOSL31 December 20088

India Strategy3QFY09: a quarter of earnings declineWe expect MOSL Universe (comprising 128 companies) excluding OMCs to deliver salesgrowth of 10.9% YoY, EBITDA decline of 1.8% YoY, and net profit de-growth of 8.4%YoY in 3QFY09.Earnings growth of 25% (BSE Sensex) has underpinned India’s growth story for the lastfive years. In the past, growth has been broadbased, with most sectors contributing.However, we note significant divergence in earnings growth in the recent quarters. Weanalyze the following two trends: [I] Inter-sector performance divergence, and [II] Intrasectorperformance divergence.MOSL UNIVERSE 3QFY09 PERFORMANCE (RS B)SALES EBITDA NET PROFITDEC-07 DEC-8 GR. (%) DEC-07 DEC-08 GR. (%) DEC-07 DEC-8 GR. (%)MOSL Universe 4,058 4,133 1.8 799 778 -2.6 495 440 -11.2MOSL Excl. Banks 3,886 3,916 0.8 649 595 -8.4 414 340 -17.8MOSL Excl. OMCs 2,858 3,169 10.9 763 749 -1.8 471 431 -8.4Sensex 1,851 2,052 10.9 502 507 1.2 312 294 -5.8*128 companies Source: MOSLI] Inter-sector performance divergence? Top five sectors accounting for 69% of the earnings are expected to report superior3QFY09 earnings growth of 7.3% v/s MOSL Universe earnings de-growth of 8.4%(both excluding OMCs).? Banking and Oil & Gas, the two biggest contributors to earnings, would account for42% of earnings, while they would contribute only 15.6% to earnings growth.? Strongest earnings growth would be delivered by Banking, IT and Engineering, whilehighest earnings de-growth would be reported by Metals, Autos and Real Estate.TOP 5 SECTORS: EARNINGS GROWTH AT 7.3% V/S UNIVERSE DE-GROWTH OF 8.4%CONTRIBUTION TO (%) CHG (%)PAT PAT GR. YOYBanks (18) 23 45 22Oil Gas & Petchem (7) 19 -30 -12IT (8) 13 25 22Telecom (3) 9 10 12Utilities (5) 6 1 2Total (Top 5 Sectors) 69 51 7Total (Others) 31 49 -31MOSL Universe 100 100 -8Note: For this section, the analysis excludes OMCsSource: MOSL31 December 20089

India StrategySECTORS WITH HIGHEST EARNINGS GROWTHCONTRIBUTION TO (%) CHG (%)PAT PAT GR. YOYBanks (18) 23 45 22IT (8) 13 25 22Engineering (9) 5 8 15Top 3 Total MOSL Universe 41 78 21Total (Others) 59 22 -22MOSL Universe 100 100 -8SECTORS WITH LOWEST EARNINGS GROWTHCONTRIBUTION TO (%) CHG (%)PAT PAT GR. YOYMetals (8) 5 -109 -67Auto (5) 2 -22 -52Real Estate (2) 4 -27 -40Bottom 3 Total MOSL Universe 11 -159 -58Total (Others) 89 259 6MOSL Universe 100 100 -8Source: MOSL? In MOSL Universe, 50 companies with earnings contribution of 41% are expected toreport earnings growth of 15%+.? Another 25 companies with earnings contribution of 26% are likely to report earningsgrowth of 15 >0-15 Negative25companieswill reportgrowth of0-15%50companieswill reportgrowth ofover 15%Source: MOSL31 December 200810

India StrategyDISTRIBUTION OF COMPANIES BASED ON EARNINGS GROWTHEARNINGS GROWTH OF 0-15% (% OF MOSL UNIVERSE)PATNO OF COMPANIESRANGE GR. (%) >15% >0-15% 15% (% OF MOSL UNIVERSE)EARNINGS GROWTH OF

India StrategyINTRA-SECTOR 3QFY09 EARNINGS DIVERGENCESECTORS PAT EARNINGS GROWTH IN EARNINGS NEGATIVE EARNINGSGROWTH (%) EXCESS OF 15% GROWTH IN 0-15% EARNINGS GROWTH MOMENTUMAuto -52 - Hero Honda Bajaj Auto, M&M,Maruti Suzuki,Tata MotorsBanks 22 HDFC Bank, State Bank, BoB, ICICI BankAxis Bank, Canara Bank, HDFCIndian BankCement -19 Shree Cement India Cements, ACC,Ambuja Cement Grasim IndustriesEngineering 15 Crompton Greaves, BHEL, Larsen & Toubro ABB,SiemensSulzon Energy154021 2311244FMCG 13 HUL, Nestle, ITC Tata TeaUnited SpiritsMarico552Infrastructure 1 HCC, NCC, B L Kashyap Jaiprakash Associates,SimplexIVRCL Infrastructure3 14Information Technology 22 HCL Tech., Infosys, Tech Mahindra, Patni ComputerWiproTCS521Media -4 Zee Entertainment, Jagran H T Media,Sun TVDeccan2 2 2MetalsOil and Gas & Petchem-67-12--Jindal Steel & PowerCairn India,JSW Steel, Tata Steel,RIL,00ONGCSterlite, Hindalco, SAILGAIL1374Pharamaceuticals 1 Dr.Reddy’s, Divis Labs, Lupin Cipla, Glenmark Pharma,4Sun Pharma,Ranbaxy4 7Piramal HealthcareReal Estate -40 - - DLF,Unitech0 0 2Retail -40 Pantaloon, - -20 0Titan -TelecomTextilesUtilities32-302Bharti AirtelRaymondPTC India,--CESC, NTPC,Idea Cellular,Alok Industries,-112Reliance InfrastructureTata PowerReliance CommVardhman Textiles000233Others 28 Blue Star, Bombay Rayon, - Greaves Cotton10Everest Kanto,4United Phosphorous,Note: Earnings momentum represents number of companies in every sector in the MOSL Universe in each of the 3 buckets of earningsgrowth31 December 200812

India StrategyKey earnings divergence for Sensex stocks in 3QFY09? SBI is expected to be biggest contributor to 3QFY09 earnings growth at 34%, followedby Bharti Airtel (29%) and Infosys (17%). These three stocks would contribute 80%of Sensex earnings growth.? 14 of the 30 Sensex stocks would report positive earnings growth.? Among the stocks making the highest negative contributions to Sensex earnings growthfor 3QFY09 are Tata Steel (-96%), followed by DLF (-42%), Reliance Industries(-27%), Tata Motors (-22%) and Maruti Suzuki (-14%).3QFY09 EARNINGS DECOMPOSITION OF SENSEX STOCKS (RS B)EBITDA NET PROFIT CONTRIBUTIONCOMPANY NAME DEC-07 DEC-08 % VAR DEC-07 DEC-08 % VAR % GR. %State Bank 36.6 44.6 21.8 18.1 24.3 34.3 8.3 34.1Bharti Airtel 29.6 39.7 33.9 17.2 22.5 30.8 7.7 29.2Infosys 13.9 19.3 38.7 12.3 15.4 25.0 5.2 17.0ONGC 80.3 84.4 5.1 43.7 46.3 5.9 15.7 14.3BHEL 8.7 11.0 26.3 6.9 8.8 27.7 3.0 10.5TCS 15.8 19.5 23.6 13.3 15.2 14.2 5.2 10.4HDFC Bank 10.7 13.3 25.1 4.3 6.1 43.2 2.1 10.2Satyam Computer 4.7 7.2 53.4 4.3 6.2 42.6 2.1 10.2Wipro 8.7 11.8 35.8 8.3 9.6 16.2 3.3 7.4ITC 12.0 13.8 15.1 8.3 9.5 14.1 3.2 6.5Hind. Unilever 5.6 7.1 25.5 5.5 6.4 15.3 2.2 4.7Reliance Infrastructure 0.7 2.9 297.5 1.4 2.2 56.2 0.8 4.4Larsen & Toubro 7.6 9.7 28.1 5.1 5.7 11.1 2.0 3.2HDFC 7.6 8.1 6.5 5.6 6.0 7.9 2.0 2.4Jaiprakash Associates 2.2 3.7 65.3 1.6 1.5 -1.0 0.5 -0.1Tata Power 2.7 3.6 34.2 1.5 1.4 -6.7 0.5 -0.6Sterlite Inds. 15.7 10.4 -33.6 8.6 8.4 -1.4 2.9 -0.7NTPC 29.7 29.3 -1.2 19.9 19.5 -2.0 6.6 -2.2ACC 4.2 3.9 -6.5 3.1 2.6 -15.3 0.9 -2.6Ranbaxy Labs 3.0 2.0 -31.2 1.7 0.8 -55.0 0.3 -5.2Reliance Comm 21.1 24.4 15.7 14.0 12.8 -8.2 4.4 -6.3Mahindra & Mahindra 3.3 2.1 -37.3 2.8 1.4 -52.2 0.5 -8.2Grasim Industries 8.6 5.6 -34.2 5.5 3.2 -41.5 1.1 -12.6Hindalco 8.0 6.2 -22.1 5.4 3.1 -42.8 1.1 -12.8ICICI Bank 22.6 23.4 3.7 12.3 9.9 -19.3 3.4 -13.0Maruti Suzuki 7.0 4.1 -41.8 4.7 2.1 -54.7 0.7 -14.1Tata Motors 8.2 3.5 -56.9 4.2 0.1 -96.6 0.1 -22.1Reliance Inds. 58.3 55.9 -4.1 38.8 33.9 -12.6 11.5 -26.8DLF 25.0 18.0 -27.9 21.4 13.9 -35.1 4.7 -41.5Tata Steel 39.4 18.7 -52.7 12.5 -4.9 P to L -1.7 -95.7Sensex (30) 502 507 1.2 312 294 -5.8 100.0 -100.0Note: Tata Steel ConsolidatedSource: MOSL31 December 200813

India StrategyCorporate sector has consistently performed ahead of our estimatesCorporate performance has been better than our expectation even in 2QFY09, althoughmacro headwinds had led to fears of earnings downgrades. For each of the previous 10quarters, Sensex earnings growth has been ahead of / in line with our estimates. For3QFY09, we expect Sensex companies to deliver EBITDA growth of 1% and profit degrowthof 6%.TREND IN SENSEX PAT GROWTH (% YOY) TREND IN MOSL UNIVERSE (EXCL OMC) PAT GROWTH (%)48.033.018.0332411631 304333312518 20 272160402026 2212 834 37 5537 40 3223 26 25 193.00-12.0-6-20-83330322825 26Estimates373522 2217111637Actual 43 YOY19312929281131 3125222537Estimates262226281812Actual YOY2523 2321 2119181411QFY072QFY073QFY074QFY071QFY082QFY083QFY084QFY081QFY092QFY093QFY09E1QFY072QFY073QFY074QFY071QFY082QFY083QFY084QFY081QFY092QFY093QFY09E31 3022 23284333331831Estimates Actual YOY25211618201415272117-61QFY072QFY073QFY074QFY071QFY082QFY083QFY084QFY081QFY092QFY093QFY09E1QFY063QFY061QFY073QFY071QFY083QFY081QFY093QFY09E1QFY063QFY061QFY073QFY071QFY083QFY081QFY093QFY09EESTIMATES V/S ACTUAL IN SENSEX SALES GROWTH (%) ESTIMATES V/S ACTUAL IN SENSEX EBITDA GROWTH (%)Source: MOSLESTIMATES V/S ACTUAL SENSEX PAT GROWTH (%)Source: MOSL31 December 200814

India Strategy2009: key investment themsCY09 has begun with an uncertain outlook of economic growth. While the slowdown hasgained momentum in 2HFY09, we believe that the markets have discounted an almost nogrowthenvironment for FY10. We now focus on key themes to play in CY09.#1. Earnings trend to be volatile and divergentCY08 – year of significant earnings downgradesThe downturn in global commodities, impact of higher interest rate regime in 1HCY08(due to monetary tightening by RBI), execution-related issues and overall slowdown markedthe beginning of the earnings downgrade cycle in 2HCY08. Since June 2008, our SensexEPS estimates for FY09 and FY10 have seen downgrades of 12% and 26% respectively.As can be seen below, our Sensex EPS estimates for FY09 and FY10 were largelyunchanged from March 2008 to June 2008. The biggest contributor to the earningsdowngrades has been a sharp fall in commodity prices.CHANGE IN SENSEX EPS ESTIMATESFY 09 EPS% Revision in FY09 EPSFY10 EPS% Revision in FY10 EPS1,0901,03097091085010.0 16.2 16.9 17.8 20.5 20.1 20.6 21.4 8.9 7.38919551,064989 1,0071,0021,0111,016908894241914941,4501,3501,2501,1501,05095029.0 29.6 29.5 23.9 16.9 8.51,3731,299 1,3091,2591,06197032241680Dec-06Mar-07Jun-07Sep-07Dec-07Mar-08Jun-08Sep-08Oct-08Dec-08Dec-07Mar-08Jun-08Sep-08Oct-08Dec-08Source: MOSLSharp fall in commodity prices the biggest contributor to downgrades? The key contributors to the downgrade in our Sensex EPS estimate for FY09 sinceSeptember 2008 are Tata Steel (downgrade of 36%), ONGC (downgrade of 17%)and Reliance Industries (downgrade of 15%).? The downgrade in our Sensex EPS estimate for FY10 can be attributed to a largernumber of stocks, though the top three downgrades have been in the commodity stocks– Tata Steel (downgrade of 53%), Reliance Industries (downgrade of 32%) and DLF(downgrade of 30%).? For FY10, we now estimate Sensex EPS growth at 5.9% (v/s 7.7% in FY09) on theback of sales growth of 5.5% (v/s 16.3% in FY09) and EBITDA growth of 9.1%(v/s 10.7% in FY09). Currently, we estimate Sensex EPS for FY10 at Rs970.? Excluding the growth from Reliance Petroleum and E&P business of Reliance Industries,Sensex EPS is likely to decline 0.5% to Rs889 in FY10.31 December 200815

India StrategySENSEX EPS AND GROWTH (% YOY)Sensex EPS (Rs) Sensex EPS Growth (%)1,15090065040015015.2 28.0 29.1 16.4 37.3 16.0 7.3 8.5 -0.5833 894970889718523450348272FY03 FY04 FY05 FY06 FY07 FY08 FY09E FY10E FY10E*EPS growth YoY (%)45.035.025.015.05.0-5.0Note: *Excl Reliance Petroleum & E&P business of Reliance IndustriesSource: MOSL? For MOSL Universe excluding OMCs, we expect sales growth of 6% (v/s 18% inFY09), EBITDA growth of 10.6% (v/s 9.3% in FY09), and net profit growth of 6.3%(v/s 5.5% in FY09) in FY10.? Real Estate (-12%), Metals (-19%) and Cement (-24%) would post negative earningsgrowth. Pharma (39%), Infrastructure (26%), FMCG (22%) and Autos (21%) wouldpost earnings growth of over 20%. Capital Goods would witness earnings growth of18%, Telecom 15%, and Banks 13%.MOSL UNIVERSE: FY10 SECTORAL GROWTH TREND (%) MOSL UNIVERSE: FY10 SECTORAL CONTRIBUTION TO GROWTH (%)60.040.020.00.039282622211815139MOSL UniverseGrowth: 6%2 160.040.020.00.0-20.037361919 15158433 1-20.0-12-19-24-40.0-40.0PharmaMediaInfraFMCGAutoEnggTelecomBanksOil & GasITUtilitiesReal EstMetalsCement-60.0Oil & GasBanksPharmaTelecomEnggFMCGAutoInfraMediaITUtilitiesReal Est-8 -13-43CementMetalsSource: MOSL? Reliance Industries would contribute ~52% to the overall earnings growth in FY10.The other stocks with 10%+ contribution to earnings growth would be ReliancePetroleum (35%), Bharti Airtel (13%), and State Bank (12%).31 December 200816

India StrategyTOP 10 CONTRIBUTORS TO FY10 EARNINGS GROWTHEPS (RS) % CHG YOY CONTRIBUTION TO (%)COMPANY NAME FY09E FY10E FY10E PAT PAT GROWTHReliance Inds. 95.7 140.2 46.6 12.2 51.6Bharti Airtel 45.5 54.9 20.7 5.7 13.0State Bank 137.7 153.8 11.7 7.2 11.7ICICI Bank 32.8 42.2 28.4 2.6 7.5BHEL 67.9 86.5 27.4 2.3 6.6HDFC Bank 53.3 67.4 26.5 1.6 4.3ITC 9.0 10.4 16.0 2.1 3.9Hind. Unilever 9.2 11.3 23.6 1.4 3.4HDFC 78.8 95.1 20.6 1.5 3.4Power Grid Corp. 4.4 5.4 22.3 1.2 3.0Source: MOSL? In terms of negative contribution to earnings growth, ONGC (-13.7%) tops the list.The other stocks with negative earnings growth contribution of over 5% are SterliteIndustries (-12.3%), Tata Steel (-9.8%), Hindalco (-9.6%), and DLF (-5.9%).10 WORST CONTRIBUTORS TO FY10 EARNINGS GROWTHEPS (RS) % CHG YOY CONTRIBUTION TO (%)COMPANY NAME FY09E FY10E FY10E PAT PAT GROWTHONGC 106.5 97.6 -8.3 11.5 -13.7Sterlite Inds. 63.0 39.0 -38.1 1.5 -12.3Tata Steel 101.5 85.1 -16.2 3.8 -9.8Hindalco 9.6 2.0 -78.8 0.2 -9.6DLF 38.7 34.0 -12.1 3.2 -5.9SAIL 13.4 11.8 -12.3 2.7 -4.9Nalco 23.0 13.0 -43.5 0.5 -4.7Grasim Industries 237.0 172.3 -27.3 0.9 -4.3ACC 57.7 39.7 -31.1 0.4 -2.4Ambuja Cements 7.7 5.8 -24.9 0.5 -2.1Source: MOSLBEST/WORST 10 IN TERMS OF FY10 EARNINGS GROWTH (%)100.033550.047454128 28 27 27 27 2680.0-50.0-43 -38 -31 -27 -25 -16 -13 -12 -12-100.0Rel.PetroRel.Inds.CiplaIdea CellularICICI BankHero HondaBHELRanbaxyHDFC BankZee Enter.Nifty-79HindalcoNalcoSterliteACCGrasimAmbuja Cem.Tata SteelUnitechSAILDLFSource: MOSL31 December 200817

India Strategy#2. Liquidity crunch to liquidity surplus? The Indian economy underwent a significant liquidity crunch for most of CY08, drivenby higher working capital due to high commodity prices, drying up of overseasborrowings, tight domestic liquidity due to monetary policy tightening as late as August2008, and unprecedented borrowings by oil and fertilizer companies. The average loangrowth for the year ranged from 23% to 29%. The stress on liquidity was evidentfrom the net infusion by RBI between May to October 2008.COLLECTIONS THROUGH REVERSE REPO ROUTE (RS B)1,000500Signficant increase in collectionthrough reverse repo route0-500-1,000Apr-07May-07Jun-07Jul-07Aug-07Sep-07Oct-07Nov-07Dec-07Jan-08Feb-08Mar-08Apr-08May-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Source: RBI/Bloomberg/MOSL? We believe that CY09 would see a complete reversal in the liquidity environment. Inour view, banks would be left with more funds than they can deploy in the emergingenvironment. This would enable the flow of funds to sectors that were hitherto deprivedof funding due to tight liquidity.? In CY09, we estimate loan growth of 18% or Rs4.7t assuming (1) 25% growth inagriculture lending, (2) 22% growth in industrial lending (infrastructure lending growthassumed at 35%), and (3) 13% growth in services sector and personal loans.? We estimate that there would be liquidity surplus in the system v/s liquidity crunch inCY07 and CY08. Assuming 2% reduction in CRR, 2% reduction in SLR and 18%growth in NDTL, we estimate excess liquidity in the system at Rs1.6t.Key assumptions factored in by us:? Deposit growth of 18% YoY in CY09, leading to total inflow of Rs7.2t to the system.? We have assumed that banks will keep SLR ratio at 26% in CY09, resulting inincremental outflow of Rs1.1t in G-Secs (currently at 27% v/s 24% required).? 200bp cut in CRR by RBI, which would lead to release of at least Rs633b.31 December 200818

India StrategyLIQUIDITY CRUNCH TO SURPLUS - SCENARIO ANALYSIS (RS T)CY07 CY08* CY09ETotal Inflows expected in the systemDeposits (1) 29.3 35.5 41.9YoY Gr (%) 19.2 21.5 18.0Total Inflow via Deposits 5.6 6.3 6.4Other Liabilities (2) 3.6 4.2 5.0YoY Gr (%) 18.1 21.6 18.0Total Inflow via Other Liabilities 0.6 0.6 0.8Net Demand and Time Liab (NDTL) (1+2) 32.8 39.7 46.9YoY Gr (%) 23.2 20.9 18.0Total Inflow via NDTL (A) 6.2 6.9 7.1Total Regulatory RequirementsSLR 9.6 10.9 12.2SLR to NDTL (%) 29.1 27.3 26.0Total Outflow on a/c of SLR Req 1.9 1.3 1.3CRR 2.5 2.1 1.5CRR (%) 7.5 5.3 3.5Total Inflow/outflow on a/c of CRR Req 0.5 -0.4 -0.6Total Requirement (B) 2.4 0.9 0.7Total Outflow on a/c of Loan GrowthLoan Book 20.9 26.4 31.2YoY Gr (%) 22.1 26.4 17.8Total Outflow via Loan Growth 3.8 5.5 4.7Non Investment Book 0.8 1.0 1.1YoY Gr (%) 1.0 18.7 15.0Total Outflow via lnvestments 0.0 0.2 0.1Total Outflow Expected via Loan Growth © 3.8 5.7 4.9Surplus/Shortfall of Liquidity (A-(B+C)) 0.0 0.2 1.6*CY08 data is till 19th December, 2008SECTOR WISE GROWTH IN LOAN BOOK (RS T)CY07 CY08* CY09ELoan Book of Indian Banks 20.9 26.4 31.2YoY Gr. (%) 22.1 26.5 17.8Agri Loans 2.5 3.0 3.8% to Total Loans 12.0 11.5 12.2YoY Gr. (%) 20.8 25.0Industrial Loans 8.2 10.6 12.9% to Total Loans 39.2 40.0 41.3YoY Gr. (%) 29.1 21.6Of Which Infra Loans 1.8 2.4 3.2% to Total Loans 8.5 9.0 10.3YoY Gr. (%) 34.5 33.7 35.0Of which Metal and Metal Products 1.0 1.3 1.2% to Total Loans 4.8 4.9 3.8YoY Gr. (%) 11.0 30.1 -10.0Of Which Oil and Petro etc 0.4 0.7 0.4% to Total Loans 1.7 2.7 1.4YoY Gr. (%) 17.8 102.3 -39.4Services Loans 4.9 6.4 7.2% to Total Loans 23.4 24.3 23.2YoY Gr. (%) 21.0 31.2 12.9Personal Loans 5.3 6.4 7.2% to Total Loans 25.4 24.3 23.3YYoY Gr. (%) 21.0 13.0Source: RBI/MOSL31 December 200819

India StrategySECTORS TO BENEFIT FROM IMPROVED LIQUIDITY POSITIONSECTORREMARKSAuto ? Higher dependence on financing for vehicles (~85% for CVs, 70% for cars and50% for 2Ws).? Availability of finance was a key issue (therefore more sensitive to demand)than cost of finance, as banks were refraining from Auto finance.? Industry participant expects financing issues to be ease from June 2009.Banks believe that this could happen sooner.? Expect demand revival from 2QFY10.Real Estate ? Around 70% of new house purchases are on mortgage funding.? RE companies indicate that domestic banks continue to abstain from lending toRE developers.? Most developers have not witnessed any perceptible benefits on debt availabilityor on funding cost due to current measures.? However, RE companies are hopeful that the lower interest rate scenario willhelp them in the near future by i) lowering cost for refinanced debt andii) stimulating demand in the affordable housing segment, which most developersplan to target aggressively.Infrastructure ? Earlier, companies were finding difficult to achieve financial closure of theprojects, particularly those based on PPP framework.? Debt availability has improved for Infrastructure developers; financial closurefor few projects in the final stages.? Construction companies will benefit significantly from lower interest rate andavailability of working capital facility.? Rs400b additional funding would be available to infrastructure projects as IIFCLrefinances banks over 18 months.#3. Sharp fall in interest rates expected? From its high of 12.6% in 2HCY08, inflation has declined significantly to current levelsof 6.61%, providing RBI with significant monetary cushion to stimulate demand. Inour 2QFY09 strategy report, we had highlighted the likely fall in inflation due to lowercommodity prices. Lower fuel and other commodity prices have accelerated the paceof drop in inflation; we believe that the base impact in 1QCY09 would take inflationlevels to 0-2%.? Over the last 12 months, the average WoW change in WPI Index is 0.156%, muchabove the preceding 3-year average change of 0.107%. The two key drivers of thisinflation are basic metals and oil prices, which have come down significantly over thepast six months.? We present a scenario analysis to assess the outlook for inflation. (A) Base case: Anaverage WoW rise of 0.075% for the next 6-9 months, (B) Optimistic case: no changein WPI, and (C) Pessimistic case: WoW change of 0.15%.31 December 200820

India StrategyWHOLESALE PRICE INDEX (WPI) SENSITIVITY16.0012.00No WoW growth in WPIAssuming 0.075% WoW growth in WPIAssuming 0.15% WoW growth in WPI8.004.000.006.61.84.12.90.9-1.2-4.00Sep-07Dec-07Mar-08Jun-08Sep-08Dec-08Mar-09(3.2)Jun-09Source: Bloomberg/RBI/MOSL? By March 2009, inflation would drop to 2.9% in the base case scenario, 1.8% in theoptimistic scenario, and 4.1% in the pessimistic scenario. By June 2009, inflation woulddrop to -1.2% in the base case scenario.? We believe that RBI would continue to provide monetary stimulus and resort to ratecuts in line with the global trend to boost demand. In 2HCY08, RBI has already cutCRR by 350bp to 5.5% and repo rates by 250bp to 6.5%. Most of the state-ownedbanks have cut their deposit rates and lending rates by 150-200bp in the last couple ofmonths, led by repo rate and CRR cuts. We do not factor in any fall in SLR due toexpected fiscal slippage after the announcement of stimulus package and the sharpslowdown in tax collections. We expect another 100-150bp rate cut by banks over thenext three months. As liquidity becomes surplus and demand outlook stabilizes, wealso expect risk premiums to decline, resulting in an even bigger decline in corporatelending rates.INFLATION AND 1-YEAR TERM DEPOSIT RATES (%)TREND IN CORPORATE BOND V/S G-SEC YIELD1612Expect further 200bp cut in CRR, as inflation isexpected to come down to a level of 4.1% by2009, even in the pessimistic scenario12.010.510 Year AAA Corporate Yield (%)10 Year G-Sec Yield (%)10.211.584-4.71 Year Deposit Rates Inflation (%)0.9FY 94FY 95FY 96FY 97FY 98FY 99FY00FY01FY02FY03FY04FY05FY06FY07FY08June-09*Sep-09*9.07.56.04.5Dec-019.07.7Jun-02Dec-02Jun-03Dec-035.1Jun-04Dec-04Jun-05Dec-05Jun-06Dec-06Jun-077.585.3Dec-07Jun-08Dec-08Source:MOSLSource: RBI/Bloomberg/MOSL31 December 200821

India Strategy#4. Corporate profit growth to be led by commodity users? In 2HCY08, commodity prices globally have declined significantly, on fear of demanddestruction, particularly in developed markets. Crude oil prices have corrected from ahigh of US$147/bbl in July 2008 to current levels of US$37/bbl, 12% lower than FY05average levels of US$42/bbl. Similarly, the prices of key metals like Aluminum, Copperand Steel are near their FY05 averages.? Lower commodity prices would significantly benefit user industries where the demandoutlook, though deteriorating, is relatively better. We believe that key sectors thatwould benefit are: (1) Autos, (2) Capital Goods, (3) FMCG, and (4) Construction.Sectors that would be negatively impacted include (1) Upstream Oil, and (2) Metals.TREND IN COMMODITY PRICES…KEY COMMODITIES BACK TO FY05 LEVELSAVERAGE PRICES CHG (%)COMMODITY CURRENCY/ CURRENT OVER OVER OVERUNIT FY05 FY06 FY07 FY08 1HFY09 PRICES 1HFY09 FY08 FY05Coal US$/Mt 54 47 50 76 140 89 -36 17 65Crude Oil US$/Bbl 42 58 64 82 119 42 -65 -49 -1Palm Oil US$/Mt 402 375 458 854 969 451 -53 -47 12Aluminium US$/Mt 1,781 2,031 2,667 2,628 2,868 1,508 -47 -43 -15Baltic Index 4,334 2,703 3,833 7,866 8,125 774 -90 -90 -82Copper US$/Mt 3,068 4,158 7,099 7,703 7,940 3,042 -62 -61 -1Steel HR Coil Sheet US$/Mt 540 414 535 625 1,064 475 -55 -24 -12Source: Bloomberg/MOSLSensitivity analysis - impact of commodity prices on various sectorsWe present our analysis of the likely impact of change in commodity prices on various stocks and the likely winners ineach sector.1) Auto Sector - Hero Honda is likely to be the biggest beneficiaryFACTORS DETERMINING COMMODITY PRICE IMPACTCOMPANY RM KEY RM (KG PER UNIT) PRICING DEMAND(% OF SALES) POWER OUTLOOKBajaj Auto 74.5 Steel (65-70Kg), Aluminum (~15Kg),Plastics (~7Kg), RubberHero Honda 71.7 Steel (~65-70Kg), Aluminum (~15Kg),Plastics (~7Kg), RubberMaruti Suzuki 76.4 Steel (625-675Kg), Aluminum (~50Kg),RubberAuto companies EBITDA marginswere impacted by 400bp duringFY06-09 due to rising commodityprices. With softening in keycommodity prices, benefit isexpected to reflect from 4QFY09due to inventories/contracts.31 December 200822

India StrategyTREND IN RM COST AND EBITDA MARGINSFY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10Bajaj AutoRM as % of Sales 62.0 65.1 69.1 69.4 72.5 73.2 74.5 72.6EBITDA Margins (%) 19.9 17.3 15.4 17.7 14.9 14.3 12.4 14.5Hero HondaRM as % of Sales 68.0 69.1 70.1 69.5 72.5 71.6 71.7 68.7EBITDA Margins (%) 16.9 16.8 15.7 15.7 11.8 13.1 12.8 15.5Maruti SuzukiRM as % of Sales 79.1 76.1 76.6 75.1 74.2 74.8 76.4 74.5EBITDA Margins (%) 7.3 13.6 14.2 15.4 14.2 14.2 10.7 12.1Sector AggregateRM as % of Sales 71.3 71.3 72.8 71.9 73.6 73.6 74.6 72.3EBITDA Margins (%) 13.5 15.5 15.0 16.1 13.9 13.9 11.7 13.7Source: MOSLWinners:? Hero Honda: Hero Honda sources its rawmaterials on spot basis and hence wouldbenefit from lower steel and othercommodity prices. This coupled with rampupat Haridwar would drive earningsgrowth of 28% in FY10.? Bajaj Auto: Bajaj Auto would also benefitfrom lower commodity prices, but with lagdue to inventories & contracts. Margins areexpected to improve by 210bp in FY10.? Maruti: Maruti is expected to benefit fromlower commodity prices, although with lageffect. However, benefit would be diluteddue to depreciating Rupee, as it importsabout 40% of its steel requirement as wellas higher royalty payment to parent.2) FMCG Sector - HUL, GCPL to be the key beneficiariesFACTORS DETERMINING COMMODITY PRICE IMPACTCOMPANY RM KEY RM (KG PER UNIT) PRICING DEMAND(% OF SALES) POWER OUTLOOKHindustan Unilever 54.3 Palm Oil (23), Chemicals & Perfume (49)Godrej Consumer 51.4 Palm Oil (~48)Nestle 49.0 Milk (39), Raw Coffee (12), Wheat (9)Marico 43.0 Oil Seeds (49), Raw Oil (27)Surge in crude linked and agricommodities has led to significantmargin erosion during the last 18months; Crude linked commoditieshave seen sharp decline andsome of them are quoting below3-year low prices. Agricommoditieshave remained firmdue to increase in MinimumSupport Price (MSP) and lowerproduction of certain crops.TREND IN RM COST AND EBITDA MARGINS31 December 2008FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10Hindustan UnileverRM as % of Sales 52.2 53.2 54.0 55.3 54.7 54.3 54.3 53.1EBITDA Margins (%) 19.6 19.5 14.5 13.0 13.6 13.7 12.9 13.9Godrej ConsumerRM as % of Sales 47.4 49.7 51.5 48.1 51.3 49.0 51.4 48.2EBITDA Margins (%) 16.9 17.8 17.9 20.2 18.9 19.6 16.9 20.0NestleRM as % of Sales 43.5 44.7 46.4 45.1 46.9 48.1 49.0 48.7EBITDA Margins (%) 21.4 21.3 20.5 21.4 19.5 20.1 19.7 20.7MaricoRM as % of Sales 64.1 63.7 61.4 52.6 51.6 51.4 53.0 50.7EBITDA Margins (%) 9.6 8.9 8.8 12.6 12.8 12.9 12.0 12.9Source: MOSLWinners? Hindustan Unilever: The benefits of~60% decline in palm oil prices and ~16%decline in LAB prices (3% up YTD) wouldstart accruing from 4QCY08.? Godrej Consumer: With ~50% of the rawmaterial being palm oil 6-8% price increasein soaps and 11% in powder hair color willboost margins from current quarteronwards.Losers? Nestle: Liquid milk, sugar and wheatprices are expected to remain firm, whilecoffee has peaked out. Gross margins havedeclined 100bp in 9MCY08 and the pressureis likely to sustain.? Marico: Copra prices have declined 10%while safflower oil prices are firm due tolower crop output. Volume growth andmargins in Saffola are likely to remain underpressure.23

India Strategy3) Capital Goods - BHEL likely to be significant beneficiary, as 55% contracts are fixed priceFACTORS DETERMINING COMMODITY PRICE IMPACTCOMPANY RM KEY RM (KG PER UNIT) PRICING DEMAND(% OF SALES) POWER OUTLOOKABB 74 Steel (27-34), CRGO (8-11), Copper (20-27)BHEL 48 Steel (70)Larsen & Toubro 52 Milk (39), Raw Coffee (12), Wheat (9)Siemens 81Suzlon Energy 58 Steel (40-45)TREND IN RM COST AND EBITDA MARGINSFY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10ABBRM as % of Sales 65.6 69.9 73.2 71.9 73.6 72.4 73.8 73.3EBITDA Margins (%) 10.0 9.4 9.4 10.7 11.2 12.2 11.5 11.2BHELRM as % of Sales 42.7 43.0 51.3 51.3 47.6 52.2 53.0 53.0EBITDA Margins (%) 14.9 16.2 17.0 18.9 20.4 18.9 17.0 20.4Larsen & ToubroRM as % of Sales 54.9 49.6 55.1 53.6 52.5 52.2 51.6 52.7EBITDA Margins (%) 8.4 5.7 6.6 7.5 10.3 11.4 11.7 12.0SiemensRM as % of Sales 68.1 70.1 72.6 76.4 80.7 80.7 80.7 80.7EBITDA Margins (%) 1.8 9.2 9.7 8.8 9.5 9.3 10.7 10.3Suzlon EnergyRM as % of Sales 59.4 64.6 58.6 60.6 60.2 64.8 66.5 62.7EBITDA Margins (%) 12.5 16.9 24.2 22.9 16.5 15.1 13.6 14.9Sector AggregateRM as % of Sales 53.5 52.1 57.8 58.2 58.5 60.0 59.9 59.1EBITDA Margins (%) 10.3 10.4 11.5 13.0 14.1 13.9 13.4 14.6Source: MOSLEngineering sector had witnessedEBITDA margin expansion duringFY03-08, despite commodity priceincreases. This was driven byoperating leverage. Decline incommodity prices have impactedcapex in user industries likemetals, hydrocarbons, etc, whichwould impact margins goingforward.Winners? BHEL: Large part of SEB and industrycontracts on fixed price basis which willadd to margins in FY10. Expect marginimprovement driven by operating leverageand savings in RM costs.Losers? L&T: Savings in RM costs to be offset bynegative operating leverage.? ABB: Demand impacted given that industrysegment accounted for 46% of EBIT.Savings in RM costs to be offset bynegative operating leverage.#5. NPAs to rise – but would be well managed? Indian banks have witnessed significant improvement in asset quality over the last fewyears. From a high of 10% in FY02, gross NPAs have declined to 2.25% in FY08.Asset quality has peaked and is set for significant deterioration, as the economicslowdown and shrinking corporate earnings growth take a toll. Though rising NPAswould significantly raise the provisioning requirements for banks, we believe that thereare enough levers with banks to still deliver earnings growth.? We analyze the Indian banking sector’s asset quality scenario over the next threeyears. We also show the impact of higher NPA provisioning and consequent earningsgrowth on SBI (used as a proxy for the banking sector).Key assumptions for the banking system? Though our analysis shows that incremental slippages are likely to be ~5.3%, beingconservative, we have assumed gross aggregate slippage ratio of ~7.5% over FY08-11.? On the back of the economic slowdown and fall in recoveries, we have assumed31 December 200824

India Strategyhigher net slippage ratio for the banking system. We expect net slippage ratio to increaseto 4.6%, higher than the aggregate net slippage ratio during FY98-08.? Overall, we model gross NPAs in the system to rise to 4.6% in FY11 from 2.3% inFY08. Assuming 50% provision coverage ratio, we expect the net NPA ratio to risefrom 1% in FY08 to 2.4% in FY11.TREND IN SLIPPAGE RATIO, GNPA AND NPA PROVISION (RS B)OPENING SLIPPAGE REDUCTION/ NET CLOSING PROVISIONS NET NETADVANCE GNPA ADDN RATIO UPGRADES/ SLIPPAGE GNPA GNPA FOR PROVISION NPA NPAWRITE OFF RATIO RATIO RATIO NPAS COVERAGE RATIO2005-06 15,514 595 214 1.86 287 (0.63) 518 3.34 326 63 185 1.222006-07 20,125 511 262 1.69 262 (0.00) 505 2.51 304 60 201 1.102007-08 25,079 505 344 1.71 283 0.30 564 2.25 317 56 247 1.002008-09E 30,847 564 502 2.00 254 0.99 812 2.63 386 50 426 1.402009-10E 36,399 812 925 3.00 203 2.34 1,534 4.22 747 50 787 2.212010-11E 42,951 1,534 910 2.50 460 1.24 1,984 4.62 972 50 1012 2.41Source: RBI/MOSLKey assumptions for SBI? Advances growth of 25% in FY09, 18% in FY10 and 18% in FY11. NII and feeincome would grow at an average 15% over FY09-11.? Operating expenses would grow at 11% CAGR over this period. There could be apositive surprise here, as natural attrition would cap wage bill.? Slippage ratio would rise from 2.3% in FY08 to 3.5% in FY10. We have also assumedlower recoveries and upgrades in this period.? Provision coverage ratio of >50% over FY08-11.? Increase in NPA provisioning by 80% in FY09, by 75% in FY10 and 25% in FY11.? We have assumed modest treasury gains of Rs15b in each of FY10 and FY11. Theunrealized gains at current bond yields are significant to post higher gains.SBI: FINANCIAL PERFORMANCE (RS M)2008 2009E 2010E 2011ENet Interest Income 170,212 216,176 252,804 288,526YoY Gr. (%) 13.0 27.0 16.9 14.1Other Income (ex treasury) 77,486 98,350 113,016 129,999Total Income 247,698 314,525 365,821 418,525YoY Gr. (%) 13.1 27.0 16.3 14.4Operating Expenses 126,086 145,060 161,743 179,868YoY Gr. (%) 6.6 15.0 11.5 11.2Core Operating Profit 121,612 169,465 204,078 238,657YoY Gr. (%) 20.7 39.3 20.4 16.9Provisions (excld. Investment Related) 27,573 45,104 71,889 89,418YoY Gr. (%) 36.4 63.6 59.4 24.4Profit before tax and investment Gains 94,039 124,361 132,190 149,239YoY Gr. (%) 16.8 32.2 6.3 12.9Investment Gains 10,350 11,500 15,000 15,000PBT 104,389 135,861 147,190 164,239YoY Gr. (%) 37.5 30.1 8.3 11.6PAT 67,291 86,951 97,145 108,398YoY Gr. (%) 48.2 29.2 11.7 11.6Source: MOSL31 December 200825

India StrategySBI: AVAILABLE UNREALIZED TRADING GAINS IN THE BOOKS (RS B)Deflation in loan book canbe offset by inflation inbond portfolioPARTICULARSAMTInvestment Book 2,000Of which -Held Till Maturity 1,200G Sec 1,100Subsidaries 100Available for Sale 800Capitalization Bonds 100Other G Sec 450Corporate Bonds 150Other Liquid Investments 100Unrealised gains on G Sec BookHeld Till Maturity (HTM) 149Available for Sale (AFS) 42Total Unrealized Gains 191In our estimates, SBI's unrealized gains ontotal bond portfolio could be around Rs190b.We have assumed (a) duration of 4-5 yearson HTM book. (b) 300bp yield decreaseThis unrealized gain represents 39% of SBI'sstandalone net worth as of March 2008 and320% of SBI net NPA as on September 2008.Source: MOSL#6. Insurance inflows to be biggest source of liquidity? FIIs have been net sellers in Indian equities to the extent of US$13.3b in CY08, thefirst time since CY99. This outflow is on the back of a record inflow of US$17.4b inCY07. Domestic mutual funds have, however, invested US$3.5b in equities in CY08.This is the fourth consecutive year of positive inflows by domestic mutual funds. Thepositive feature of this trend is that the inflows have continued despite a sharp andcontinuous decline in equities.? Private insurance companies have emerged as the biggest investors in Indian equitieswith investment of US$14.6b in CY08.NET INVESTMENT IN EQUITIES (US$ B)FIIsMFs21.014.07.00.0-7.0-14.01.51.62.70.86.78.510.88.017.4-13.34.53.01.50.0-1.5-0.1-1.1-0.60.1-0.33.03.41.63.5CY99CY00CY01CY02CY03CY04CY05CY06CY07CY08CY00CY01CY02CY03CY04CY05CY06CY07CY08Source: NSE/SEBI/MOSL31 December 200826

India Strategy? In CY08, total investments by domestic institutional investors (LIC, private insurancecompanies and mutual funds) have been more than the FII outflows. As against FIIselling of US$13b in CY08, private insurance companies invested US$14b, while MFswere net buyers at US$3b.YEARLY TREND IN INVESTMENTS (US$ B) MONTHLY INVESTMENT BY PRIVATE INSURANCE COMPANIES (US$ B)25.015.05.066FII Cash Dom MF & Insurance1813202.501.700.900.101.20.90.30.10.11.50.52.21.20.9 0.92.01.40.00.82.31.70.80.4-5.0-15.0-11FY07 FY08 FY09E-0.70-1.50-1.0May-07Jun-07Jul-07Aug-07Sep-07Oct-07Nov-07Dec-07Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Source: NSE/SEBI/MOSLEquity ownership of FIIs dwindlingThe significant outflow by FIIs, which was matched by MFs and insurance companies,has led to a change in shareholding pattern for several companies. Considering BSE-500as a sample for comparison, cumulative stake of FIIs has come down from 19.4% inCY05 to 16.7% in September 2008. Total domestic institutional holding has increasedfrom 7.5% in CY07 to 8.5% in September 2008. The balance is represented by the retailinvestor participation, as the promoter holding remains unchanged at 57%.FII STAKE IN INDIAN EQUITIESDFI STAKE IN INDIAN EQUITIES20.018.016.014.012.0FII (USD B) - RHS FII % (LHS) FIIs ReduceStake19.419.7 29216.315.314.313.4 553713 15CY01CY02*Excl ADR/GDRCY03CY0499CY05146CY06CY0717.816.714910615.788Sep 08CY08ECY08E*3002251507513.0010.29.48.67.87.0Dom. MF and Insurance (USD B) - RHSDom. MF and Insurance % (LHS)9.7 10.0 8.69 11CY01CY02617.9 7.9 8.321 27 40CY03CY04CY05CY06122CY077.5DomesticInvestorsTake It Up76Sep 08638.5CY08E1409.2 10570350Source: MOSL31 December 200827

India StrategyFII OWNERSHIP OF INDIAN EQUITIES GOING DOWN SINCE CY06Net Chg in InstOwnership3.3-0.50.40.33.20.6-2.7 -0.1 -0.3Change in DII Stake (%)1.6Change in FII Stake (%)-0.1-1.8-3.5TotalInstitutional23.4FII ownership of Indian equitieshas reduced since CY06CY02 CY03 CY04 CY05 CY06 CY07 Sep 08 CY08E23.824.2 27.328.025.325.224.9Source: MOSL#7. Elections: key event for 2009? In CY09, the key event to watch out would be the General Elections to be held in May.Investors were surprised by the outcome of the elections in CY04, which had led to asignificant decline in the markets. The recent history of state election results inRajasthan, MP, Chattisgarh, Delhi, J&K, etc does not provide any definite trend on alikely winner. In all probability, it would again be a coalition government. However, thedominance of the largest party in the ruling coalition and its ability to introduce economicreforms would be a significant catalyst for Indian equities.? We have tried to analyze the market return in the run-up to the election and returnspost election outcome. We measured the performance of the market on the basis of 6-month returns pre-election and post-election. We notice that in five out of six times,the run-up to the election has been positive for the market (except 1998), while in fourout of six times, the market has given negative returns post election outcome.MARKET RETURNS IN THE RUN-UP TO THE ELECTION AND AFTERYEARS % RETURN BEFORE ELECTION % RETURN AFTER ELECTION3 MONTH 6 MONTH 3 MONTH 6 MONTH1989 -2.2 0.5 3.3 -11.21991 8.1 4.0 -32.4 -29.2Coalition era begins1996 5.9 23.6 5.3 28.91998 2.2 -15.3 -10.2 17.91999 8.4 31.0 -13.4 -1.22004 -4.0 11.1 5.8 -6.3Source: MOSL31 December 200828

India StrategyVALUATIONS REASONABLESENSEX P/E (X)SENSEX P/BV (X)274.52224.324.6 23.083.53.71715 Year Median 13.4x2.51278.710.11.50.51.41.815 Year Average 2.2xDec-93Dec-95Dec-97Dec-99Dec-01Dec-03Dec-05Dec-07Dec-93Dec-94Dec-95Dec-96Dec-97Dec-98Dec-99Dec-00Dec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07Dec-08SENSEX ROE (%) SENSEX EARNINGS YIELD V/S BOND YIELD (%)262224.12.21.72.01.91815 Year Average 18.3%17.41.215 Year Avg is 0.84x1410Dec-93Dec-94Dec-9513.9Dec-96Dec-97Dec-98Dec-99Dec-00Dec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07Dec-080.70.2Dec-930.3Dec-94Dec-95Dec-96Dec-97Dec-98Dec-99Dec-00Dec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07Dec-08INDIAN MARKET CAP TO GDP (%) INDIAN CORPORATE PROFITS TO GDP (%)1159065401519915443 4319 241993199544341997513728261999200110985 8558544326232003200520072009E7.56.04.53.01.50.01.3 1.61.6 2.2199119933.5 3.32.42.31.8 1.9 2.12.3 3.1199519971999200120036.1 6.44.9 5.5 6.04.4200520072009ESource: BloombergSource: MOSL31 December 200829

India StrategyTOP LARGE CAP PICKSFinancialsSBIHDFC Bank? A significant easing in monetary policy has paved the way for cut in lending rates without impacting profitability ofbanks. A lower interest rate environment augurs well for loan book growth as well as stability of asset quality.? The fall in G-Sec yields has led to significant unrealized bond gains (25-40% of net worth), providing buffer forexpected rise in NPA costs going forward. Excess SLR will aid credit growth and drive treasury gains.? Natural attrition in PSU banks would improve cost to income ratio. We expect C/I ratios to improve even for privatebanks in future as they slow down expansion plans.? Despite a sharp rise in NPAs (gross NPAs rising 2.2x in FY10E from FY08 level), we expect earnings to grow 10-15%in FY10. We expect PSU banks’RoE to sustain at 16-22% over the next two years, while private banks (ex-ICICI Bank)would report 18-20% RoE.? Deposit franchise is the best in the industry, ensuring cost of funds (

India StrategyTOP LARGE CAP PICKSVALUATION SUMMARY FOR AUTOSCMP EPS (RS) PE (X) EV/EBITDA (X) ROE (%)(RS) FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EHero Honda 805 48.5 59.5 76.0 16.6 13.5 10.6 10.0 8.5 6.1 35.5 35.8 36.9Maruti Suzuki 520 59.2 42.2 48.7 8.8 12.3 10.7 4.0 5.4 4.3 20.6 12.6 13.2Source: MOSLTelecomBhartiRCOM? Despite a strong growth of 50% YoY and subscriber addition run rate at 10m+ per month, India remains one of the mostunder-penetrated among the emerging markets with a wireless penetration of only 28% and overall tele-density of32%. We expect an average EBITDA growth of 30% for listed majors driven by subscriber growth of 36% in FY10.? However, rollout activity and new launches will accelerate over the next few quarters, marking likely increase incompetitive intensity. MNP implementation during FY10 could put upward pressure on subscriber retention costs anddrag sector margins. Most major operators are well funded post recent equity deals and remain well-placed financiallyto absorb the ‘new-business’ losses from upcoming launches.? Adequate spectrum availability in most circles implies low risk of overbidding for 3G. We believe Bharti remains bestplaced for the auctions given its unlevered balance sheet, synergy with its 2G operations, and large captive high ARPUcustomer base.? Continues to improve its market leadership with a subscriber share of 25%. Will report growth of a 25-30% CAGR inrevenue, EBITDA and earnings.? Superior return ratios – RoE of 32% and RoIC of 30% – reflect its scale advantage and lowest cost of producingnetwork minutes. Bharti’s declining capex intensity and potential FCF generation is a clear advantage and would guardits valuation premium.? We maintain Buy on Bharti on highest earnings visibility in the current challenging margin environment, low capexintensity, unlevered balance sheet, and relatively better-positioned tower portfolio for potential value accretion.? Valuations at 7.4x EV/ EBITDA and 13x P/E FY10E are well supported by 25-30% earnings and EBITDA CAGR overFY08-10E.? GSM launch in 14 circles will drive market share gains for RCOM. We expect RCOM’s GSM launch to drive an increasein its share of subscriber net adds from 17.2% in 3QFY09 to 19.4% in 4QFY09E and 21% in FY10E and also boostwireless MOUs.? Concerns on liquidity and gearing have been overdone. RCOM has announced capex plan of US$6b in FY09, implyingRs130b residual capex in 2HFY09. We expect capex intensity to decline sharply to ~35% in FY10 v/s an estimated100% in FY09, which should improve liquidity in the medium-term. Leverage level remains comfortable at 0.5x net debt/equity and 1.7x net debt/annualized EBITDA.? We maintain Buy on RCOM based on upside to KPIs and market share post GSM scale-up. The stock currently tradesat 5.3x FY10E EV/EBITDA and P/E of 7.8x FY10E.VALUATION SUMMARY FOR TELECOMCMP EPS (RS) PE (X) EV/EBITDA (X) ROE (%)(RS) FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EBharti Airtel 715 35.4 45.5 54.9 20.2 15.7 13.0 12.3 9.2 7.4 36.9 31.9 28.6Reliance Comm 227 26.7 28.2 29.2 8.5 8.1 7.8 6.9 7.1 5.3 22.7 19.6 17.8Source: MOSLRefining andMarketingCompanies(RMCs)? Over the last few years, RMCs have witnessed significant de-rating due to earnings erosion and high debt levels dueto high oil prices. The current decline in oil prices should act as a significant catalyst for the earnings and valuationsof RMCs.? Lower crude prices and recent issue of oil bonds will ease the liquidity position significantly. Combined debt levels ofthe three RMCs will reduce by 66% from current level of ~Rs1,080b to Rs371b by end-FY10.? Based on our FY10 oil price estimate of US$60/bbl, earnings for RMCs would be significant with EPS for HPCL atRs39.5, BPCL at Rs49.2 and IOC at Rs57.3. Even a US$10/bbl decline in average oil price would result in EPS upsideof 76% for HPCL, 54% for BPCL and 50% for IOC.? Likely deregulation of petrol and diesel pricing will be positive for companies and would result in rerating, in our view.On FY10 P/B basis, HPCL trades at 0.8x, BPCL trades at 0.9x and IOC trades at 1x. We upgrade all three RMCs - HPCL,BPCL and IOC - to Buy.31 December 200831

India StrategyTOP LARGE CAP PICKSIOCHPCL? Significant decline in crude prices and recent issue of oil bonds will ease the liquidity position. We expect the debt levelof IOC to decline from current Rs600b to Rs300b by end-FY09.? On incremental basis, IOC would be making profits on the marketing business (v/s net under recovery till date) apartfrom its refining business and profits from pipeline. Compared to other RMCs, IOC’s profitability is protected due to itsincome from pipeline business and investments.? Likely deregulation of petrol and diesel prices would result in the rerating of the stock. IOC trades at 7.4x FY10E PE and1x FY10E P/B. We upgrade IOC to Buy.? Significant decline in crude prices and recent issue of oil bonds will ease the liquidity position of HPCL. Expect debt toreduce to Rs140b by end-FY09 v/s current level of ~Rs240b.? As HPCL has highest leverage towards marketing business, it will be the biggest beneficiary of the turnaround inmarketing business of RMCs. It has highest sales to refinery throughput ratio of 1.5x compared to 1.2x for BPCL and1.3x for IOC.? Likely deregulation of petrol and diesel prices would result in rerating of the stock. HPCL trades at 6.9x FY10E PE and0.8x FY10E P/B. We upgrade HPCL to Buy.VALUATION SUMMARY FOR RMCsCMP EPS (RS) PE (X) EV/EBITDA (X) ROE (%)(RS) FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EHPCL 273 33.5 5.8 27.2 8.1 47.3 10.0 17.3 14.5 7.6 11.3 1.9 8.6IOC 426 66.4 69.9 62.7 6.4 6.1 6.8 7.2 9.1 7.2 19.7 17.9 14.1Source: MOSLConstructionIVRCLNCC? MOSL construction universe has healthy order book (Rs609b, 3x TTM revenue) as on September 2008, whichprovides robust revenue visibility. We expect revenue CAGR of 29% over FY08-10.? Decline in commodity prices will have a positive impact on EBITDA margin, given part of order book on fixed pricecontracts (highest for Nagarjuna Constructions and Gammon) and WPI-based projects (which tracks commoditiesprice movement with time lag). We expect EBIDTA margin of 10.6% in FY10, up from 10.4% in FY08.? Interest cost/revenue is expected to increase to 3.2% in FY09, up from 1.8% in FY07. Given the current reduction ininterest cost, we expect interest cost as % of revenue to decline to 2.7-2.9% in FY10.? Working capital will improve with decline in commodity prices, improved terms with creditors and lower inventorystocking period. Thus, we expect net working capital to decline to 118 days in FY10 from 124 days in FY08 and 126days in FY09.? The sector trades at attractive valuations of 6-8x FY10 earnings P/E. Our top bets are IVRCL and Nagarjuna Constructions.? Strong revenue visibility driven by healthy order book of Rs138b (a book to bill ratio of 3.2x TTM revenue) coupled withthe declining trends in interest cost and working capital will drive the stock performance during 4QFY09/FY10. Weexpect earnings CAGR of 18% over FY08-10, led by revenue CAGR of 36%.? During FY10, the net working capital will improve driven by better payment terms with material suppliers, primarily steeletc, the interest cost will decline by 200-300bp impacting the earnings positively.? Order book to bill ratio stands at of 3.1x TTM revenue, providing strong revenue visibility for FY10 and FY11. We expectimprovement in EBIDTA margin during 2HFY09 / FY10 given higher proportion of fixed price contracts (at ~30% of OB).? Cost of debt is expected to decline by 150-200bp during FY10 coupled with improvement in the working capital due tobetter terms with the suppliers, leading to earnings upgrade in FY09 / FY10. We expect earnings CAGR of 22%through FY08-FY10.? NCC has decided to restrict incremental investments in RE/BOT projects. In BOT projects, the outstanding commitmentis limited to Rs700m over next 12 months.VALUATION SUMMARY FOR CONSTRUCTIONCMP EPS (RS) PE (X) EV/EBITDA (X) ROE (%)(RS) FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EIVRCL Infra. 144 15.4 16.8 21.2 9.3 8.6 6.8 7.6 6.8 5.2 14.0 13.1 14.6Nagarjuna Construction 72 7.1 8.1 10.5 10.2 8.9 6.9 7.7 7.0 6.1 12.4 11.2 13.2Source: MOSL31 December 200832

India StrategyTOP MID-CAP PICKSCanara Bank ? Big beneficiary of low interest rates and easing monetary policy environment in FY09 and FY10. Margins will expandCMP (Rs): 196 in FY09 by 20bp and will be stable in FY10 as repricing of bulk deposits (25% of total deposits) would lead to sharpMCap (US$b): 1.7 fall in cost of funds.TP (Rs): 277 ? Bond gains would boost earnings and provide buffer against rising NPAs in coming years.Upside (%): 41 ? We expect operating profit and earnings CAGR of 23% and 16% respectively over FY08-10E.? Return ratios are superior at 1% RoA and 20% RoE over the next two years. Stock trades at 0.8x FY09E BV and4x FY09E EPS.Indian Bank ? Has one of the best retail deposits base with bulk deposits at mere 10% of total deposits. This ensures that cost ofCMP (Rs): 141 funds (6.1%) and margins (3.5%) remain superior to peer banks.MCap (US$b): 1.3 ? Net NPA at 0.2% and coverage at 80%+ is among the best. This ensures that NPA costs would be lower even if assetTP (Rs): 194 quality worsens due to economic slowdown.Upside (%): 38 ? Capital adequacy is strong with Tier I at 10%+, ensuring strong balance sheet growth.? Return ratios are superior at 1.5% RoA and 20%+ RoE over next two years. Stock trades at 1.1x FY09E BV and 5xFY09E EPS.Bajaj Auto? With improvement in availability of finance expected by 1QFY10, volume growth should pick up. Our estimatesCMP (Rs): 391 conservatively factor in 7.3% volume growth in FY10.MCap (US$b): 1.0 ? Exports will remain a substantial proportion of volumes. We estimate share of exports to rise to 37% of volume in FY10TP (Rs): 621 (v/s 25% in FY08).Upside (%): 59 ? Margin will improve by 210bp to 14.5% in FY10E, driven by savings in raw material cost (~190bp decline), resulting in26% earnings growth in FY10E. The stock trades at attractive valuations of 6.3x FY10E EPS of Rs62.1. Maintain Buy.United Phosphorus ? UPL with strong global presence (3rd largest generic player and 11th largest overall) and presence across agri-inputCMP (Rs): 108 value chain is well placed to benefit from agricultural growth.MCap (US$b): 1.0 ? Has achieved critical mass with annual cash profits in excess of US$150m. The company can aggressively pursueTP (Rs): 140 future growth without putting pressure on its balance sheet. It raised US$475m through equity issue, which hasUpside (%): 31 strengthened its cash chest for acquisitions and organic initiatives.? UPL’s 49% stake in Advanta gives access to fast growing seeds business. It has a growing product portfolio of hybridand GM seeds in India, Australia, Argentina, and other international markets and also offers significant upside fromlaunch of healthy sunflower oil (Nutrisun) in CY09.? Earnings to grow 30% in FY10. Valuation at 7.6x FY10E EPS of Rs14.1 is attractive. Buy.HCL Technologies ? Has signed orders worth US$1b during 2QFY09 (December 2008 quarter), even as most other players are strugglingCMP (Rs): 123 with delayed decision making cycles and lack of demand visibility.MCap (US$b): 1.7 ? The Axon acquisition has helped HCLT bolster its SAP practice to take on the large vendors, having increased theTP (Rs): 180 share of ERP from 11% of revenue to ~25%. HCL Axon already boasts of an order pipeline worth US$1.2b.Upside (%): 46 ? Having strengthened its foothold in ERP, HCLT might benefit in the long term from the problems at Satyam’s end (has astrong foothold in ERP, with ~44% revenue contribution).? We expect HCLT to post US$ revenue growth of 19% in FY10 (10% ex-Axon), the strongest in the large cap IT space,on the back of record order wins and synergies with the Axon brand. The stock trades at 5x FY10 earnings. Buy.Lupin ? Will witness a gradual improvement in the underlying fundamentals led by an expanding US generics pipeline, niche /CMP (Rs): 618 Para-IV opportunities in the US, strong performance from Suprax (branded product in US), ramp-up in formulationMCap (US$b): 1.0 revenues from its European initiative and strong growth in the domestic formulations business.TP (Rs): 890 ? Core operations will record 25% sales and 30% earnings CAGR for FY08-10 (ex one-off upsides).Upside (%): 44 ? Is gaining critical mass in the US market, while European market revenues are likely to gradually ramp-up FY09Eonwards. Incremental benefits are likely to be visible from the Jammu facility that enjoys fiscal benefits.? Will report EPS of Rs63.8 in FY10. Valuation at 9.7x FY10 EPS is attractive. Early resolution of US FDA observations isimperative. Buy.Divi's Lab? Will record 27% revenue CAGR over FY08-10E driven by increased traction in the CRAMS business and newCMP (Rs): 1,330 launches in the generic API segment.MCap (US$b): 1.8 ? Divi’s will be a key beneficiary of the increased outsourcing from India. It enjoys strong relationships with manyTP (Rs): 1,510 innovator pharmaceutical companies based in regulated markets. It provides services to 20 of the top 25 globalUpside (%): 14 innovator pharmaceutical companies.? Expect 37% earnings CAGR over FY08-10E. We expect 40+% RoCE for the next few years.? We expect Divi’s to record EPS of Rs79.8/sh and Rs100.8/sh for FY09E and FY10E respectively. It trades at 13.2xFY10E core earnings.31 December 200833

India StrategyTOP MID-CAP PICKSZee Entertainment ? Subscription revenue (40% of total revenue) would be the key growth driver. DTH revenue has witnessed strongCMP (Rs):MCap (US$b):TP (Rs):Upside (%):1401.220043growth, up 100% YoY in 1HFY09. We expect the trend in subscription revenue to continue.? We expect moderation in escalating programming cost for the company primarily due to 1) easing competitive pressureled by likely consolidation in the industry and 2) lower investment in its newly launched Hindi GEC Zee Next.? Estimate a 21% CAGR (FY08-10E) in revenue and 23% CAGR (FY08-10E) in PAT. We have factored in the loss of ZeeNext in our estimates.? The stock trades at 10.5x FY10E EPS of Rs13.3. Buy.United Spirits ? United Spirits has posted 16% volume growth in 1HFY09. We expect 12-13% volume growth going forward on theCMP (Rs):MCap (US$b):8861.7back of a 60% market share in IMFL, strong brands, and being the only player with presence across price points andproduct categories.· TP (Rs):Upside (%):1,35152? Input cost pressures will subside as the prices of molasses, ENA, and glass bottles are expected to decline. Packagingcost (24% of sales) will decline due to fall in oil prices.· ? Sale of treasury stock in the next 12-15 months will reduce debt levels.· ? The stock trades at 13.1x FY10E EPS of Rs67.6. We rate United Spirits as our top bet in the FMCG sector.Bombay Rayon ? Bombay Rayon is so far insulated from the global slowdown, and its garment capacities are booked until April 2009.CMP (Rs):MCap (US$b):TP (Rs):Upside (%):1250.2472278? By end-FY09, Bombay Rayon’s mega Rs11b project at Maharashtra will be fully commissioned. Considering thevarious project incentives, the company claims that it will be one of the world’s lowest cost producers of fabric andgarments.? We expect EPS growth of 57% in FY09 and 40% in FY10.? The stock is attractively valued at 4.4x FY09E and 3x FY10E.VALUATION SUMMARY FOR TOP MID-CAP PICKSCMP EPS (RS) P/E (X) EV/EBITDA (X) ROE (%)(RS) FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EBajaj Auto 391 57.0 49.4 63.3 6.9 7.9 6.2 3.9 4.3 3.1 47.6 37.2 37.9Bombay Rayon 125 18.2 28.5 39.8 6.9 4.4 3.1 7.1 6.6 4.5 22.7 26.3 26.8Canara Bank 188 38.2 47.5 51.6 4.9 4.0 3.6 0.9 0.8 0.7 19.1 21.5 20.0Divis Labs 1,339 53.8 79.8 100.8 24.9 16.8 13.3 21.3 13.8 10.8 49.5 48.3 42.4HCL Technologies 115 15.5 24.2 23.3 7.5 4.8 4.9 3.1 3.4 3.1 20.1 28.9 24.7Indian Bank 137 23.5 27.9 28.6 5.8 4.9 4.8 1.3 1.1 0.9 25.8 23.8 20.7Lupin 618 37.8 49.7 63.5 16.3 12.4 9.7 13.8 9.3 7.5 31.0 30.4 30.9United Phosphorous 108 7.7 10.8 14.1 13.9 10.0 7.6 6.9 4.9 3.8 21.2 22.3 24.0United Spirits 886 39.7 47.6 67.6 22.3 18.6 13.1 15.3 13.1 10.7 34.9 30.3 29.4Zee Entertainment 140 9.3 10.6 13.3 15.0 13.2 10.5 11.6 9.4 8.1 13.5 14.5 15.7Note: For Banks the values appearing in EV/EBITDA are P/BSource: MOSL31 December 200834

Model PortfolioMOSL MODEL PORTFOLIOSECTOR WEIGHT / BSE-100 MOST WEIGHT RELATIVE EFFECTIVE SECTORPORTFOLIO PICKS WEIGHT TO BSE-100 STANCEBanks 21.9 25.0 3.1 OverweightSBI 3.8 7.0 3.2 BuyHDFC Bank 3.7 5.0 1.3 BuyICICI Bank 5.1 5.0 -0.1 BuyPNB 0.8 4.0 3.2 BuyCanara Bank 0.0 4.0 4.0 BuyEngg./ Infrastrcuture/Real Estate 10.7 12.0 1.3 OverweightBHEL 2.4 4.0 1.6 NeutralL&T 4.2 3.0 -1.2 NeutralIVRCL 0.2 3.0 2.8 BuyNagarjuna Construction 0.0 2.0 2.0 BuyTelecom 7.7 9.0 1.3 OverweightBharti Airtel 4.9 5.0 0.1 BuyReliance Com 1.7 4.0 2.3 BuyAuto 3.1 8.0 4.9 OverweightHero Honda 0.8 3.0 2.2 BuyMaruti Suzuki 0.8 3.0 2.2 BuyBajaj Auto 0.3 2.0 1.7 BuyInformation Technology 9.2 8.0 -1.2 UnderweightInfosys 5.6 5.0 -0.6 BuyHCL Tech 0.3 3.0 2.7 BuyFMCG 9.2 8.0 -1.2 UnderweightITC 4.7 4.0 -0.7 BuyUnited Spirits 0.5 4.0 3.5 BuyPetrochemicals 11.2 7.0 -4.2 UnderweightReliance Inds. 10.0 7.0 -3.0 BuyPharmaceuticals 3.8 6.0 2.2 OverweightLupin 0.0 2.0 2.0 BuyDivi’s Lab 0.4 2.0 1.6 BuyPiramal Healthcare 0.0 2.0 2.0 BuyOil & Gas 6.4 6.0 -0.4 UnderweightIOC 0.5 3.0 2.5 Under ReviewHPCL 0.5 3.0 2.5 Under ReviewMetals / Utilities 10.0 5.0 -5.0 UnderweightJindal Steel & Power 0.7 3.0 2.3 BuyTata Steel 1.1 2.0 0.9 BuyOthers 6.8 6.0 -0.8 UnderweightBombay Rayon 0.0 2.0 2.0 BuyZee Entertainment 0.4 2.0 1.6 NeutralUnited Phosphorus 0.4 2.0 1.6 BuyCash 0.0 0.0 0.00Total 100.0 100.031 December 200835

MOSL UniverseANNUAL PERFORMANCE - MOSL UNIVERSESECTOR SALES EBITDA NET PROFIT(RS BILLION)Y/E MARCH FY09E FY10E CH. (%)* CH. (%)# FY09E FY10E CH. (%)* CH. (%)# FY09E FY10E CH. (%)* CH. (%)#Auto (5) 743 776 -4.2 4.5 74 93 -19.6 25.3 46 55 -24.7 20.8Banks (18) 843 990 25.3 17.5 699 856 27.3 22.3 354 399 20.3 12.6Cement (7) 452 461 8.0 2.1 118 102 -10.3 -13.5 67 51 -12.8 -23.7Engineering (9) 1,094 1,282 26.0 17.2 149 190 19.1 27.5 108 128 22.1 18.0FMCG (12) 663 752 19.7 13.6 118 142 11.9 19.6 85 104 11.8 21.9IT (8) 1,110 1,180 31.7 6.3 271 274 32.7 0.8 207 211 21.7 1.8Infrastructure (8) 297 380 34.0 27.7 41 51 34.1 25.1 17 21 13.1 26.0Media (6) 66 75 17.3 12.7 23 28 7.8 23.1 14 18 3.1 28.3Metals (8) 3,187 3,071 11.1 -3.6 522 458 -10.7 -12.3 279 225 -12.2 -19.4Oil Gas & Petchem (10) 8,845 7,583 17.2 -14.3 935 1,060 2.9 13.4 535 581 4.9 8.6Pharma (15) 483 565 22.3 17.0 102 123 14.8 20.9 60 84 -6.5 39.3Real Estate (2) 183 188 -1.6 2.8 103 97 -14.0 -5.2 79 69 -16.9 -12.3Retail (2) 113 140 39.9 24.0 10 13 44.9 32.3 4 5 36.4 45.5Telecom (3) 707 886 33.8 25.4 276 350 26.6 26.7 153 176 15.3 15.3Textiles (4) 104 128 15.2 22.9 16 19 14.0 20.6 3 4 -18.4 43.4Utilities (5) 666 720 18.9 8.0 145 158 6.7 8.5 102 103 9.2 1.1Others (6) 127 158 32.8 23.6 26 33 36.5 30.6 14 17 33.1 27.6MOSL (128) 19,683 19,335 17.4 -1.8 3,628 4,047 8.1 11.6 2,126 2,252 5.0 5.9MOSL Excl. Banks (110) 18,840 18,345 17.1 -2.6 2,928 3,191 4.4 9.0 1,772 1,853 2.4 4.6MOSL Excl.Oil & Gas (118) 10,837 11,752 17.6 8.4 2,693 2,986 10.1 10.9 1,591 1,671 5.1 5.0MOSL Excl. RMs (125) 14,551 15,429 18.1 6.0 3,471 3,839 9.3 10.6 2,019 2,146 5.5 6.3Sensex (30) 9,791 10,331 16.3 5.5 2,420 2,641 10.7 9.1 1,397 1,482 7.7 6.1* Growth FY09 over FY08; # Growth FY10 over FY09. For Banks: Sales = Net Interest Income, EBITDA = Operating Profits; Tata SteelFigures are consolidated including Corus.VALUATIONS - MOSL UNIVERSESECTOR P/E EV/EBITDA P/BV ROE DIV. EARN.(X) (X) (X) (%) YLD (%) CAGR(NO. OF COMPANIES) FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY08 FY09E FY10E FY09E (FY10-08)Auto (5) 8.6 11.4 9.4 4.4 5.7 4.8 2.1 1.9 24.2 16.8 18.3 4.1 -4.6Banks (18) 10.9 9.0 8.0 N.M N.M N.M 1.9 1.5 17.1 16.2 16.2 2.4 16.4Cement (7) 5.3 6.1 8.0 3.2 3.5 3.9 1.8 1.4 33.0 22.9 15.3 3.1 -18.5Engineering (9) 17.8 14.6 12.4 12.4 10.7 8.5 4.5 3.5 25.4 24.1 24.1 1.5 20.0FMCG (12) 23.6 21.1 17.3 16.5 14.5 11.9 8.1 6.8 34.2 32.3 33.4 2.4 16.7IT (8) 10.1 8.3 8.2 7.1 5.2 4.6 3.1 2.4 30.1 29.4 24.7 3.4 11.3Infrastructure (8) 12.4 11.0 8.7 10.0 7.7 6.6 1.6 1.2 12.9 11.1 12.6 1.4 19.4Media (6) 13.7 13.2 10.3 8.3 7.6 5.9 2.6 2.3 18.9 17.1 19.0 2.1 15.0Metals (8) 3.8 4.4 5.4 2.7 3.1 3.6 0.9 0.8 24.6 18.0 13.0 3.0 -15.9Oil Gas & Petchem (10) 9.4 9.0 8.2 6.2 5.8 5.2 1.8 1.5 19.1 17.0 15.9 2.6 6.7Pharma (15) 15.8 16.9 12.1 12.4 10.6 8.5 3.8 2.9 24.1 17.1 20.2 1.0 14.1Real Estate (2) 5.8 7.0 8.0 6.1 7.3 7.3 2.4 1.9 40.7 26.7 21.0 1.3 -14.7Retail (2) 26.9 19.7 13.5 13.0 9.1 6.9 4.2 3.0 15.6 15.2 17.5 0.8 40.9Telecom (3) 15.0 13.0 11.3 10.0 8.3 6.6 3.9 2.7 25.8 21.1 19.4 0.1 15.3Textiles (4) 4.6 5.6 3.9 7.2 7.0 6.2 0.3 0.3 6.4 4.9 6.6 4.8 8.2Utilities (5) 19.8 18.1 18.0 19.4 17.8 15.4 2.4 2.2 12.1 12.1 11.4 1.8 5.1Others (6) 9.6 7.2 5.7 6.4 5.5 4.0 2.3 1.8 23.9 24.4 25.6 3.0 30.3MOSL (128) 10.5 10.0 9.4 N.M N.M N.M 2.3 1.9 21.5 18.6 17.1 2.2 5.5MOSL Excl. Banks (110) 10.4 10.2 9.7 7.2 6.9 6.3 2.3 1.9 22.5 19.1 17.3 2.1 3.5MOSL Excl.Oil & Gas (118) 10.8 10.3 9.8 N.M N.M N.M 2.4 2.0 22.5 19.2 17.6 2.1 5.0MOSL Excl. RMs (125) 10.7 10.1 9.5 N.M N.M N.M 2.3 1.9 21.9 18.8 17.4 2.2 5.9Sensex (30) 11.7 10.8 9.9 N.M N.M N.M 2.5 2.0 21.2 18.4 17.4 2.1 6.9N.M. - Not MeaningfulSource: Motilal Oswal Securities31 December 200836

MOSL Universe3QFY09: widespread damage to PAT3QFY09 aggregates for our universe of 128 companies reflect the sharp slowdown in theeconomy. Sales are expected to be up only 1.8% YoY, by far the lowest growth in the last12 quarters. EBITDA is expected to degrow 3% YoY, and PAT is expected to degrow11% YoY. This will be the second successive quarter of PAT degrowth; in 2QFY09 PATwas down 16% YoY. But unlike in 2QFY09, PAT damage in 3QFY09 is not from Oil &Gas alone but widespread – Metals, Real Estate, Autos and Cement are all badly hit.QUARTER-WISE SALES GROWTH (% YOY)QUARTER-WISE NET PROFIT GROWTH (% YOY)48%36%37.0%40.1%37.2%28%16%16.1%22.8%24%4%12%0%1.8%Mar-08 June-08 Sep- 08 Dec-08-8%-20%-11.2%-15.7%Mar-08 June-08 Sep- 08 Dec-08Source: MOSLQUARTERLY PERFORMANCE - MOSL UNIVERSESECTOR SALES EBITDA NET PROFIT(RS MILLION)(NO. OF COMPANIES) DEC.07 DEC.08 CHG. (%) DEC.07 DEC.08 CHG. (%) DEC.07 DEC.08 CHG. (%)Auto (5) 201,958 166,502 -17.6 25,993 15,707 -39.6 16,925 8,086 -52.2Banks (18) 172,474 217,114 25.9 149,866 183,324 22.3 81,548 99,428 21.9Cement (7) 88,968 94,879 6.6 28,493 22,948 -19.5 16,872 13,585 -19.5Engineering (9) 212,886 257,295 20.9 28,729 35,057 22.0 19,693 22,725 15.4FMCG (12) 140,292 167,841 19.6 28,821 33,155 15.0 20,893 23,596 12.9IT (8) 210,141 281,827 34.1 51,366 69,840 36.0 44,956 54,789 21.9Infrastructure (8) 52,990 70,656 33.3 7,261 9,889 36.2 3,726 3,759 0.9Media (6) 15,400 17,580 14.2 5,960 5,977 0.3 3,943 3,771 -4.4Metals (8) 582,016 588,346 1.1 121,796 58,494 -52.0 64,303 21,312 -66.9Oil Gas & Petchem (10) 1,897,160 1,676,574 -11.6 194,709 175,400 -9.9 118,877 91,052 -23.4Pharma (15) 104,145 126,066 21.0 24,091 26,806 11.3 16,200 16,337 0.8Real Estate (2) 47,405 41,274 -12.9 32,358 22,160 -31.5 26,682 15,918 -40.3Retail (2) 20,291 28,800 41.9 1,597 2,415 51.2 625 823 31.7Telecom (3) 135,462 183,536 35.5 56,371 70,889 25.8 33,544 37,422 11.6Textiles (4) 20,316 23,734 16.8 3,060 3,764 23.0 1,053 736 -30.1Utilities (5) 136,655 165,271 20.9 34,680 37,480 8.1 23,795 24,197 1.7Others (6) 19,940 26,157 31.2 3,491 4,611 32.1 1,772 2,273 28.3MOSL (128)* 4,058,498 4,133,454 1.8 798,642 777,915 -2.6 495,406 439,809 -11.2MOSL Excl. Banks (110) 3,886,025 3,916,340 0.8 648,776 594,591 -8.4 413,858 340,381 -17.8MOSL Excl.Oil & Gas (118) 2,161,339 2,456,881 13.7 603,933 602,516 -0.2 376,529 348,757 -7.4MOSL Excl. RMs (125) 2,857,917 3,169,026 10.9 763,114 749,060 -1.8 470,957 431,470 -8.4Sensex (30) 1,850,593 2,052,218 10.9 501,501 507,424 1.2 312,264 294,089 -5.8* Tata Steel Consolidated Source: MOSL31 December 200837

MOSL UniverseSales growth of just 1.8% YoY? In 3QFY09, we expect our Universe of 128 companies to record sales growth of only1.8% YoY. This is by far the lowest in the last 12 quarters. Much of this low growth isexplained by a 12% degrowth in Oil & Gas sales. Excluding Oil & Gas, sales growthis respectable at 14% YoY. Sales growth remains strong in Telecom (+36% YoY), IT(+34%), Infrastructure (+33%) and Banks (+26%).? Oil & Gas sales degrowth of 12% YoY is due to sharply lower prices of crude, and theconsequent cut in prices of refinery products and petrochemicals. Though Reliancesales are expected to grow 15% YoY, all the major oil marketing companies are expectedto degrow 15-20%. ONGC sales are expected to remain flat.? Auto is expected to degrow 18% YoY on the back of lower volumes following a creditcrunch. The worst hit is Tata Motors (-30% YoY) followed by Bajaj Auto (-20%).Only Hero Honda is expected to show some positive growth (+7%).? Telecom sector is expected to witness revenue growth of 36% YoY on the back ofsustained strong addition to the wireless subscriber base (+31m in 3QFY09). IdeaCellular leads the pack with revenue growth of 55% YoY, followed by Bharti (+39%)and Reliance Communication (+24%).? The IT sector is benefiting from the depreciating rupee to record a healthy toplinegrowth of 8% QoQ (34% YoY). The companies which are expected to grow fasterthan average are Mphasis (+15% QoQ) and HCL Technologies (+9% QoQ).? Infrastructure sales continue to grow on the back of strong order backlog, expected tobe up 33% YoY. The growth leaders are Jaiprakash Associates (+50% YoY), SimplexInfrastructure (+46%) and Nagarjuna Construction (+40%).? Banks continue to show strong growth in NIMs (+26% YoY) in line with buoyantcredit growth. Most banks are expected to grow +20% YoY. The only laggards areHDFC (+9% YoY) and ICICI Bank (+5% YoY).SECTORAL SALES GROWTH - QUARTER ENDED DECEMBER 2008 (%)503010MOSL Universe Sales Growth = 1.8%-10-30RetailTelecomITInfrastructureOthersBanksPharmaUtilitiesEngineeringFMCGTextilesMediaCementMetalsOil Gas &PetchemReal EstateAutoSource: MOSL31 December 200838

MOSL Universe150bp drop in EBITDA margin? We expect our Universe of 110 companies (excluding Banks) to register 3QFY09EBITDA degrowth of 8% YoY on sales growth of 1%. This implies a 150bp drop inEBITDA margin.? Margin hits are expected to be the highest in Real Estate (-14.6%), Metals (-11%) andCement (-7.8%). While Real Estate will be impacted by lower volumes and realizations,Metals will be adversely impacted by lower prices and higher input costs.? IT and Telecom are the two sectors with high growth. While IT will benefit from therupee depreciation, Telecom will benefit from the strong revenue growth, leading tohigher EBITDA growth.? Banking will report strong EBITDA growth driven by higher loan growth, stable marginsand higher trading gains. PSU banks will benefit even more as they see reduction intheir cost to income ratio.? FMCG will benefit from lower input prices although most of the benefits will accrueonly in CY09. Similarly Autos will witness benefit of lower input prices only in FY10.SECTORAL EBITDA GROWTH - QUARTER ENDED DECEMBER 2008 (%)60300-30MOSL Universe EBITDA Growth = -2.6%-60RetailInfrastructureITOthersTelecomTextilesBanksEngineeringFMCGPharmaUtilitiesMediaOil Gas &PetchemCementReal EstateAutoMetalsSource: MOSL31 December 200839

MOSL UniversePAT degrowth of 11% YoY; Sensex PAT degrowth of 6% YoY? We expect MOSL Universe aggregate 3QFY09 PAT to degrow 11% YoY. This is thesecond successive quarter of PAT degrowth (-16% in 2QFY09).? The worst hit are likely to be Metals (-67% YoY), Auto (-52%), Real Estate (-40%),Oil & Gas (-23%) and Cement (-19.5%).? The major sectors expected to report PAT growth are Banks (+22% YoY), IT (+22%YoY) and Engineering (+15% YoY).? Profit degrowth for Sensex companies is expected to be slightly lower than MOSLUniverse aggregate at 6% YoY. The worst five profit performers are expected to beTata Steel (loss of Rs4.9b v/s profit of Rs12.5b in 3QFY08), Tata Motors (-97%),Ranbaxy (-55%), Maruti Suzuki (-55%) and M&M (-52%). The best five performersare likely to be Reliance Infrastructure (+56%), HDFC Bank (+43%), Satyam Computer(+43%), State Bank (+34%) and Infosys (+25%).SECTORAL NET PROFIT GROWTH - QUARTER ENDED DECEMBER 2008 (%)4010-20MOSL Universe Net Profit Growth = -11.2%-50-80RetailOthersBanksITEngineeringFMCGTelecomUtilitiesInfrastructurePharmaMediaCementOil Gas &PetchemTextilesReal EstateAutoMetalsSource: MOSL31 December 200840

MOSL UniverseQUARTERLY PERFORMANCE - MOSL UNIVERSESECTOR EBITDA MARGIN (%) NET PROFIT MARGIN (%)(NO. OF COMPANIES) DEC.07 DEC.08 CHG. (%) DEC.07 DEC.08 CHG. (%)Auto (5) 12.9 9.4 -3.4 8.4 4.9 -3.5Banks (18) 86.9 84.4 -2.5 47.3 45.8 -1.5Cement (7) 32.0 24.2 -7.8 19.0 14.3 -4.6Engineering (9) 13.5 13.6 0.1 9.3 8.8 -0.4FMCG (12) 20.5 19.8 -0.8 14.9 14.1 -0.8IT (8) 24.4 24.8 0.3 21.4 19.4 -2.0Infrastructure (8) 13.7 14.0 0.3 7.0 5.3 -1.7Media (6) 38.7 34.0 -4.7 25.6 21.5 -4.2Metals (8) 20.9 9.9 -11.0 11.0 3.6 -7.4Oil Gas & Petchem (10) 10.3 10.5 0.2 6.3 5.4 -0.8Pharma (15) 23.1 21.3 -1.9 15.6 13.0 -2.6Real Estate (2) 68.3 53.7 -14.6 56.3 38.6 -17.7Retail (2) 7.9 8.4 0.5 3.1 2.9 -0.2Telecom (3) 41.6 38.6 -3.0 24.8 20.4 -4.4Textiles (4) 15.1 15.9 0.8 5.2 3.1 -2.1Utilities (5) 25.4 22.7 -2.7 17.4 14.6 -2.8Others (6) 17.5 17.6 0.1 8.9 8.7 -0.2MOSL (128)* 19.7 18.8 -0.9 12.2 10.6 -1.6MOSL Excl. Banks (110) 16.7 15.2 -1.5 10.6 8.7 -2.0MOSL Excl.Oil & Gas (118) 27.9 24.5 -3.4 17.4 14.2 -3.2MOSL Excl. RMs (125) 26.7 23.6 -3.1 16.5 13.6 -2.9Sensex (30) 27.1 24.7 -2.4 16.9 14.3 -2.5*Tata Steel ConsolidatedSource: MOSLEBITDA MARGIN GROWTH - QUARTER ENDED DECEMBER 2008 (%) NET PROFIT MARGIN GROWTH - QUARTER ENDED DECEMBER 2008 (%)40-2-5-8-14MOSL Universe EBITDA Margin Growth = -90bp-10-15MOSL Universe Net Profit Margin Growth = -160bp-20TextilesRetailITInfrastructureOil Gas &EngineeringOthersFMCGPharmaBanksUtilitiesTelecomAutoMediaCementMetalsReal Estate-20OthersRetailEngineeringFMCGOil Gas &BanksInfrastructureITTextilesPharmaUtilitiesAutoMediaTelecomCementMetalsReal EstateSECTORAL CONTRIBUTION TO GROWTH IN SALES, EBITDA AND NET PROFIT (%)SECTOR CONTRIBUTION SECTOR CONTRIBUTION SECTOR CONTRIBUTIONTO SALES GR. TO EBITDA GR. TO NP GR.IT (8) 95.6 Banks (18) 161.4 Banks (18) 32.2Telecom (3) 64.1 IT (8) 89.1 IT (8) 17.7Banks (18) 59.6 Telecom (3) 70.0 Telecom (3) 7.0Engineering (9) 59.2 Engineering (9) 30.5 Engineering (9) 5.5Utilities (5) 38.2 FMCG (12) 20.9 FMCG (12) 4.9FMCG (12) 36.8 Utilities (5) 13.5 Others (6) 0.9Pharma (15) 29.2 Pharma (15) 13.1 Utilities (5) 0.7Infrastructure (8) 23.6 Infrastructure (8) 12.7 Retail (2) 0.4Retail (2) 11.4 Others (6) 5.4 Pharma (15) 0.2Metals (8) 8.4 Retail (2) 3.9 Infrastructure (8) 0.1Others (6) 8.3 Textiles (4) 3.4 Media (6) -0.3Cement (7) 7.9 Media (6) 0.1 Textiles (4) -0.6Textiles (4) 4.6 Cement (7) -26.8 Cement (7) -5.9Media (6) 2.9 Real Estate (2) -49.2 Auto (5) -15.9Real Estate (2) -8.2 Auto (5) -49.6 Real Estate (2) -19.4Auto (5) -47.3 Oil Gas & Petchem (10) -93.2 Oil Gas & Petchem (10) -50.0Oil Gas & Petchem (10) -294.3 Metals (8) -305.4 Metals (8) -77.3Source: MOSL31 December 200841

MOSL UniverseScoreboard (quarter ended December 2008)TOP 10 BY SALES GROWTH (%)100%85%70%55%WORST 10 BY SALES GROWTH (%)0%-9%-18%-27%40%EverestKantoPTC IndiaBioconFederalBankBombayRayonIdea CellularJubiliantOrganosysJaiprakashAssociatesPantaloonRetailSimplexInfra.-36%MRPLTataMotorsSterliteInds.UnitechIOCBajaj AutoHindustanZincCairn IndiaChennaiPetroleumBPCLTOP 10 BY EBITDA GROWTH (%)360%270%WORST 10 BY EBITDA GROWTH (%)0%-22%180%-44%90%0%PTC IndiaRelianceInfrastructureHPCLRaymondFederal BankBPCLJaiprakashAssociatesOriental BankDivis LabsBombayRayon-66%-88%SAILJSWSteelTataMotorsHindustanZincTata SteelDeccanChronicleIOCGAILUnitechGlenmarkPharmaTOP 10 BY NET PROFIT GROWTH (%)WORST 10 BY NET PROFIT GROWTH (%)400%300%0%-40%200%-80%100%0%PTC IndiaShree CementRaymondUnitedPhosphorousRelianceInfrastructureDivis LabsUnion BankSun PharmaHDFC BankBombayRayon-120%-160%Tata SteelHPCLTataMotorsArvindMillsSAILVardhmanTextilesIOCUnitechDishmanPharmaDeccanChronicleSource: MOSL31 December 200842

MOSL UniverseReady reckoner: valuationsCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EAutomobilesBajaj Auto 391 Buy 57.0 49.4 62.1 6.9 7.9 6.3 3.9 4.3 3.1 47.6 37.2 37.9Hero Honda 805 Buy 48.5 59.5 76.0 16.6 13.5 10.6 10.0 8.5 6.1 35.5 35.8 36.9Mahindra & Mahindra 275 Buy 64.5 58.7 70.6 4.3 4.7 3.9 3.1 5.0 4.8 20.7 15.3 16.8Maruti Suzuki 520 Buy 59.2 42.2 48.7 8.8 12.3 10.7 4.0 5.4 4.3 20.6 12.6 13.2Tata Motors 159 Neutral 36.1 14.8 18.4 4.4 10.8 8.6 2.7 5.1 5.2 21.6 9.8 11.2Sector Aggregate 8.6 11.4 9.4 4.4 5.7 4.8 24.2 16.8 18.3CementACC 478 Neutral 68.1 57.7 39.7 7.0 8.3 12.0 4.1 4.2 6.8 30.8 22.1 13.9Ambuja Cements 70 Neutral 8.6 7.7 5.8 8.1 9.1 12.1 4.3 4.9 6.6 32.2 23.2 15.8Birla Corporation 129 Buy 51.1 40.4 31.5 2.5 3.2 4.1 1.0 1.2 1.1 39.1 24.4 16.5Grasim Industries 1,218 Buy 293.9 237.0 172.3 4.1 5.1 7.1 2.5 3.0 3.1 34.3 21.6 13.6India Cements 97 Buy 24.7 22.5 18.9 3.9 4.3 5.2 3.8 3.2 3.3 34.0 21.7 15.5Shree Cement 460 Buy 82.6 130.1 104.6 5.6 3.5 4.4 2.9 2.5 2.4 51.1 51.2 28.7UltraTech Cement 383 Buy 80.9 69.0 60.7 4.7 5.6 6.3 3.6 3.7 3.1 45.2 27.8 19.7Sector Aggregate 5.3 6.1 8.0 3.2 3.5 3.9 33.0 22.9 15.3EngineeringABB 453 Neutral 23.2 24.4 28.2 19.5 18.6 16.1 12.3 11.4 9.5 34.8 27.7 25.3Bharat Electronics 752 Buy 103.4 99.6 138.4 7.3 7.6 5.4 3.4 2.9 1.4 29.4 23.4 26.6BHEL 1,362 Neutral 51.3 67.9 86.5 26.6 20.1 15.7 15.6 14.1 9.7 25.7 28.2 29.8Crompton Greaves 135 Neutral 10.0 13.8 15.0 13.5 9.8 9.0 10.1 8.3 7.6 34.3 34.3 28.5Cummins India 222 Buy 16.4 20.6 25.8 13.5 10.7 8.6 21.7 17.4 13.8 28.8 29.8 30.4Larsen & Toubro 774 Neutral 39.3 52.6 57.4 19.7 14.7 13.5 16.2 12.5 10.9 27.0 24.1 22.7Siemens 287 Neutral 15.2 18.2 19.4 18.9 15.8 14.8 11.1 9.0 8.1 27.7 26.1 23.0Suzlon Energy 62 Neutral 8.1 8.2 9.2 7.7 7.6 6.8 5.9 6.4 5.8 21.7 13.3 12.3Thermax 180 UR 24.1 26.8 29.5 7.5 6.7 6.1 5.2 4.3 3.6 42.4 37.9 34.1Sector Aggregate 17.8 14.6 12.4 12.4 10.7 8.5 25.4 24.1 24.1FMCGAsian Paints 895 Buy 43.5 49.9 57.7 20.6 17.9 15.5 12.9 11.0 9.1 42.5 38.5 35.9Britannia 1,325 Buy 84.5 91.3 118.8 15.7 14.5 11.2 12.3 10.0 7.3 26.7 24.0 25.7Colgate 408 Buy 17.0 20.1 23.4 23.9 20.3 17.4 23.4 20.2 17.1 104.6 152.6 147.9Dabur 84 Neutral 3.9 4.3 5.1 21.8 19.7 16.5 17.3 16.1 12.7 54.0 44.1 40.9Godrej Consumer 139 Buy 7.1 7.1 9.3 19.7 19.6 14.9 17.3 15.0 11.3 92.8 30.3 35.0GSK Consumer 573 Buy 38.7 43.0 52.9 14.8 13.3 10.8 9.0 8.6 6.5 25.2 24.3 25.3Hind. Unilever 250 Neutral 8.1 9.2 11.3 30.8 27.3 22.1 28.1 24.2 19.0 122.9 106.1 102.3ITC 171 Buy 8.3 9.0 10.4 20.7 19.1 16.5 13.9 12.2 10.5 25.9 24.5 24.7Marico 56 Buy 2.6 3.0 3.6 21.5 18.5 15.5 14.9 12.2 10.0 50.5 41.0 35.3Nestle 1,453 Buy 44.7 56.4 71.7 32.5 25.8 20.3 19.9 16.5 13.0 73.7 83.7 83.0Tata Tea 602 Neutral 46.9 50.9 66.6 12.8 11.8 9.0 4.5 4.5 3.5 8.1 8.1 10.0United Spirits 886 Buy 39.7 47.6 67.6 22.3 18.6 13.1 15.3 13.1 10.7 34.9 30.3 29.4Sector Aggregate 23.6 21.1 17.3 16.5 14.5 11.9 34.2 32.3 33.4PULL OUT31 December 200843

MOSL UniverseReady reckoner: valuationsCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EInformation TechnologyHCL Technologies 115 Buy 15.5 24.2 23.3 7.5 4.8 4.9 3.1 3.4 3.1 20.1 28.9 24.7Infosys 1,118 Buy 79.5 101.7 105.3 14.1 11.0 10.6 10.9 7.8 7.0 36.4 37.5 31.3MphasiS 156 Buy 12.2 21.7 24.5 12.8 7.2 6.4 7.6 4.1 2.8 31.0 42.5 36.4Patni Computer 129 Neutral 32.4 30.2 27.6 4.0 4.3 4.7 0.9 0.7 0.6 18.9 14.1 11.8Satyam Computer 170 UR 25.2 34.4 34.3 6.7 5.0 5.0 3.9 2.1 1.3 26.0 28.3 23.1TCS 478 Buy 51.3 56.5 57.0 9.3 8.5 8.4 7.4 5.7 4.9 47.0 38.8 31.3Tech Mahindra 248 Neutral 58.3 78.4 82.2 4.2 3.2 3.0 3.5 2.0 1.3 70.7 56.5 38.5Wipro 234 Buy 22.2 24.6 24.7 10.5 9.5 9.5 6.3 4.7 4.8 27.9 25.1 21.1Sector Aggregate 10.1 8.3 8.2 7.1 5.2 4.6 30.1 29.4 24.7InfrastructureB.L.Kashyap 245 UR 52.6 57.0 66.4 4.7 4.3 3.7 2.7 2.2 1.6 33.1 26.9 25.6Gammon India 79 Neutral 10.5 11.5 14.3 7.5 6.8 5.5 6.0 4.6 4.2 7.5 9.7 10.9Hindustan Construction 51 Buy 2.8 3.3 4.4 18.4 15.5 11.5 7.9 6.7 6.1 7.4 8.0 9.8IVRCL Infra. 144 Buy 15.4 16.8 21.2 9.3 8.6 6.8 7.6 6.8 5.2 14.0 13.1 14.6Jaiprakash Associates 83 Buy 5.2 5.5 6.9 15.9 15.1 12.0 15.7 11.2 9.5 16.3 11.9 11.9Nagarjuna Construction 72 Buy 7.1 8.1 10.5 10.2 8.9 6.9 7.7 7.0 6.1 12.4 11.2 13.2Patel Engg. 175 Neutral 25.5 21.2 23.7 6.9 8.3 7.4 7.7 6.4 6.3 19.1 12.3 12.4Simplex Infra. 174 Buy 18.2 24.7 35.5 9.6 7.1 4.9 5.9 4.6 4.0 13.6 13.1 15.5Sector Aggregate 12.4 11.0 8.7 10.0 7.7 6.6 12.9 11.1 12.6MediaDeccan Chronicle 44 Buy 11.1 7.7 10.7 3.9 5.6 4.1 1.8 2.1 1.3 25.5 16.7 21.1HT Media 72 Buy 6.2 4.7 5.8 11.6 15.3 12.5 6.9 8.3 6.6 15.8 10.8 12.0Jagran Prakashan 59 Buy 3.3 3.4 4.9 18.1 17.4 12.1 10.0 9.7 6.6 18.2 17.8 22.7Sun TV 181 Neutral 9.3 11.5 14.2 19.4 15.6 12.7 10.6 8.3 6.6 25.0 25.3 25.5TV Today 79 Buy 7.5 9.8 12.8 10.5 8.1 6.2 6.0 5.1 3.9 15.1 16.2 18.0Zee Entertainment 140 Neutral 9.3 10.6 13.3 15.0 13.2 10.5 11.6 9.4 8.1 13.5 14.5 15.7Sector Aggregate 13.7 13.2 10.3 8.3 7.6 5.9 18.9 17.1 19.0MetalsHindalco 52 Sell 16.1 9.6 2.0 3.2 5.4 25.4 1.4 1.4 2.0 36.6 14.3 3.0Hindustan Zinc 338 Buy 104.0 66.6 47.4 3.3 5.1 7.1 1.2 1.4 1.5 37.1 18.8 12.0Jindal Steel & Power 912 Buy 88.6 178.9 192.1 10.3 5.1 4.7 8.6 4.5 4.3 35.4 44.2 32.4JSW Steel 230 Neutral 86.7 42.4 90.5 2.6 5.4 2.5 4.9 7.4 5.5 21.3 10.2 18.5Nalco 190 Sell 25.6 23.0 13.0 7.4 8.3 14.6 3.9 4.6 8.4 0.5 0.4 0.3SAIL 77 Sell 20.5 13.4 11.8 3.8 5.8 6.6 1.7 2.7 3.8 36.4 20.4 15.6Sterlite Inds. 261 Buy 64.0 63.0 39.0 4.1 4.1 6.7 0.9 0.4 0.5 28.5 22.2 13.0Tata Steel 217 Buy 94.2 101.5 85.1 2.3 2.1 2.5 3.7 3.6 3.8 48.4 36.8 25.7Sector Aggregate 3.8 4.4 5.4 2.7 3.1 3.6 24.6 18.0 13.0Oil & GasBPCL 376 Buy 48.9 58.8 59.0 7.7 6.4 6.4 8.1 8.5 6.2 15.9 15.9 14.5Cairn India 172 Buy -0.1 3.0 3.8 - 57.4 45.8 48.0 37.3 16.8 -0.1 1.8 2.2Chennai Petroleum 128 Buy 73.1 52.8 28.7 1.8 2.4 4.5 2.3 3.2 4.0 37.2 14.6 11.2GAIL 206 Buy 20.1 21.2 21.2 10.3 9.7 9.7 5.8 6.4 6.5 20.0 18.3 16.9HPCL 273 Buy 33.5 5.8 27.2 8.1 47.3 10.0 17.3 14.5 7.6 11.3 1.9 8.6Indraprastha Gas 102 Neutral 12.5 13.3 10.7 8.2 7.7 9.5 4.3 3.8 4.2 33.4 29.2 20.4IOC 426 Buy 66.4 69.9 62.7 6.4 6.1 6.8 7.2 9.1 7.2 19.7 17.9 14.1PULL OUT31 December 200844

MOSL UniverseReady reckoner: valuationsCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EOil & Gas (Contd.)MRPL 41 Sell 6.7 6.5 3.0 6.1 6.3 13.5 4.3 4.7 9.6 38.9 26.6 11.1ONGC 668 Neutral 92.9 106.5 97.6 7.2 6.3 6.8 2.8 2.4 2.5 27.7 27.1 21.5Reliance Inds. 1,230 Buy 105.0 95.7 140.2 11.7 12.9 8.8 9.7 9.0 6.6 21.5 16.1 18.3Sector Aggregate 9.4 9.0 8.2 6.2 5.8 5.2 19.1 17.0 15.9PharmaceuticalsAventis Pharma 953 Buy 62.7 63.5 67.6 15.2 15.0 14.1 10.2 9.6 8.4 21.5 20.1 19.9Biocon 117 Buy 11.3 9.6 15.9 10.4 12.1 7.3 7.2 7.5 5.2 15.3 10.0 14.7Cadila Health 268 Buy 20.5 26.3 32.6 13.0 10.2 8.2 7.8 6.2 4.8 27.3 27.8 29.9Cipla 187 Neutral 9.0 9.2 13.3 20.7 20.4 14.0 17.5 13.3 11.2 18.7 16.5 20.2Dishman Pharma 139 Buy 15.0 10.2 22.5 9.3 13.6 6.2 11.5 7.5 6.1 27.3 13.6 25.2Divis Labs 1,339 Buy 53.8 79.8 100.8 24.9 16.8 13.3 21.3 13.8 10.8 49.5 48.3 42.4Dr Reddy’ s Labs 470 Buy 27.8 30.7 46.9 16.9 15.3 10.0 12.7 9.9 8.2 9.9 10.1 12.3GSK Pharma 1,147 Buy 47.2 53.3 63.6 24.3 21.5 18.0 16.6 14.6 12.2 29.4 27.5 27.1Glenmark Pharma 295 Neutral 12.0 15.5 23.0 24.7 19.0 12.8 10.2 10.8 7.4 20.8 20.1 22.4Jubiliant Organosys 119 Buy 22.3 9.9 29.3 5.3 12.0 4.1 7.2 5.9 4.5 38.2 12.3 27.9Lupin 618 Buy 37.8 49.7 63.5 16.3 12.4 9.7 13.8 9.3 7.5 31.0 30.4 30.9Piramal Healthcare 239 Buy 17.4 18.7 25.6 13.7 12.8 9.3 10.4 8.4 6.8 34.0 32.3 35.5Ranbaxy Labs 252 Neutral 13.3 8.6 12.5 19.0 29.3 20.2 16.4 12.3 11.8 19.1 6.6 8.0Sun Pharma 1,065 Buy 71.8 52.2 63.9 14.8 20.4 16.7 12.1 16.2 13.0 38.3 19.9 20.6Wockhardt 108 Neutral 29.0 18.7 35.2 3.7 5.8 3.1 5.7 5.1 4.4 29.6 16.2 22.4Sector Aggregate 15.8 16.9 12.1 12.4 10.6 8.5 24.1 17.1 20.2Real EstateDLF 282 Buy 45.8 38.7 34.0 6.2 7.3 8.3 6.0 7.4 7.3 39.7 26.3 20.6Unitech 41 Neutral 10.2 7.4 6.4 4.0 5.5 6.3 6.2 7.0 7.2 46.1 29.2 23.3Sector Aggregate 5.8 7.0 8.0 6.1 7.3 7.3 40.7 26.7 21.0RetailingPantaloon Retail 218 Buy 7.9 10.9 17.0 27.4 20.0 12.8 10.8 7.4 5.6 9.6 9.7 12.4Titan Industries 927 Neutral 33.9 43.5 57.4 27.4 21.3 16.2 17.2 13.0 10.0 33.8 33.2 33.1Sector Aggregate 26.9 19.7 13.5 13.0 9.1 6.9 15.6 15.2 17.5TelecomBharti Airtel 715 Buy 35.4 45.5 54.9 20.2 15.7 13.0 12.3 9.2 7.4 36.9 31.9 28.6Idea Cellular 53 Neutral 4.0 2.8 3.5 13.3 18.7 14.9 9.7 7.6 6.3 30.2 10.9 8.5Reliance Comm 227 Buy 26.7 28.2 29.2 8.5 8.1 7.8 6.9 7.1 5.3 22.7 19.6 17.8Sector Aggregate 15.0 13.0 11.3 10.0 8.3 6.6 25.8 21.1 19.4TextilesAlok Ind 18 Buy 8.4 7.9 9.1 2.1 2.3 2.0 7.3 7.6 7.3 15.2 10.6 11.0Arvind Mills 18 Neutral 1.3 0.6 1.7 13.4 27.1 10.4 7.7 8.7 6.5 1.5 0.7 1.8Raymond 107 Neutral 10.6 9.4 16.9 10.1 11.4 6.3 4.8 3.7 3.0 4.5 3.9 6.9Vardhman Textiles 59 Buy 21.2 13.1 18.6 2.8 4.5 3.2 8.2 7.3 6.5 10.6 6.2 8.3Sector Aggregate 4.6 5.6 3.9 7.2 7.0 6.2 6.4 4.9 6.6PULL OUT31 December 200845

MOSL UniverseReady reckoner: valuationsCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EUtilitiesCESC 238 Neutral 26.4 29.3 26.1 9.0 8.1 9.1 10.9 9.4 8.8 13.0 12.8 10.3NTPC 181 Neutral 9.0 9.1 8.8 20.1 20.0 20.5 19.7 19.6 16.8 15.0 13.4 12.4PTC India 69 Buy 2.1 4.4 4.5 32.1 15.7 15.3 85.7 39.1 20.7 5.6 6.5 6.4Reliance Infrastructure 580 Buy 29.1 40.6 41.5 19.9 14.3 14.0 15.2 7.5 8.8 11.0 11.0 11.0Tata Power 748 Neutral 32.7 60.5 69.3 22.9 12.4 10.8 21.8 15.2 12.4 7.7 7.5 8.2Sector Aggregate 19.8 18.1 18.0 19.4 17.8 15.4 12.1 12.1 11.4OthersBlue Star 152 Buy 16.3 20.4 26.4 9.3 7.5 5.8 6.0 5.2 4.0 73.1 58.1 54.3Bombay Rayon 125 Buy 18.2 28.5 39.8 6.9 4.4 3.1 7.1 6.6 4.5 22.7 26.3 26.8Everest Kanto 181 Buy 10.5 14.7 21.4 17.2 12.4 8.5 13.1 7.3 5.1 27.2 25.0 26.3Great Offshore 220 Buy 44.4 48.9 55.2 4.9 4.5 4.0 4.5 6.0 3.9 27.6 29.7 30.9Greaves Cotton 73 Buy 19.5 16.1 19.5 3.7 4.5 3.7 1.9 2.3 1.9 31.7 20.4 21.8United Phosphorous 108 Buy 7.7 10.8 14.1 13.9 10.0 7.6 6.9 4.9 3.8 21.2 22.3 24.0Sector Aggregate 9.6 7.2 5.7 6.4 5.5 4.0 23.9 24.4 25.6UR - Under ReviewCMP (RS) RECO EPS (RS) P/E (X) P/BV (X) ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EBanksAndhra Bank 55 Buy 11.9 13.2 14.4 4.6 4.2 3.8 0.8 0.7 0.7 18.0 18.6 18.0Axis Bank 505 Buy 29.9 43.6 49.2 16.9 11.6 10.3 2.1 1.8 1.6 17.6 16.6 16.5Bank of Baroda 280 Buy 39.3 50.5 57.2 7.1 5.6 4.9 1.0 0.9 0.8 14.7 16.5 16.4Bank of India 288 Buy 38.2 53.3 51.3 7.5 5.4 5.6 1.7 1.3 1.1 27.6 27.9 21.8Canara Bank 188 Buy 38.2 47.5 51.6 4.9 4.0 3.6 0.9 0.8 0.7 19.1 21.5 20.0Corporation Bank 189 Buy 51.2 58.0 60.9 3.7 3.3 3.1 0.6 0.6 0.5 18.4 18.3 16.8Federal Bank 162 Buy 21.5 27.5 33.7 7.5 5.9 4.8 0.7 0.6 0.6 13.6 11.5 12.9HDFC 1,488 Buy 68.4 78.8 95.1 21.7 18.9 15.6 3.5 3.1 2.8 22.2 17.7 18.9HDFC Bank 998 Buy 41.0 53.3 67.4 24.3 18.7 14.8 3.1 2.9 2.5 12.6 15.2 16.7ICICI Bank 448 Buy 37.4 32.8 42.2 12.0 13.7 10.6 1.1 1.0 1.0 11.7 7.7 9.3Indian Bank 137 Buy 23.5 27.9 28.6 5.8 4.9 4.8 1.3 1.1 0.9 25.8 23.8 20.7Indian Overseas Bank 72 Buy 22.0 24.0 25.4 3.3 3.0 2.8 0.8 0.7 0.6 27.8 24.8 21.9J&K Bank 355 Buy 74.2 99.8 117.2 4.8 3.6 3.0 0.7 0.6 0.5 16.7 19.4 19.5Karnataka Bank 79 Buy 19.9 21.5 23.1 4.0 3.7 3.4 0.7 0.6 0.5 18.5 17.7 16.8Oriental Bank 154 Neutral 33.6 39.5 43.9 4.6 3.9 3.5 0.7 0.6 0.5 14.8 16.0 15.6Punjab National Bank 526 Buy 65.0 79.4 88.0 8.1 6.6 6.0 1.5 1.3 1.1 19.6 21.3 20.2State Bank 1,288 Buy 106.6 137.7 153.8 12.1 9.4 8.4 1.7 1.5 1.3 16.8 16.6 16.4Union Bank 163 Buy 27.5 33.1 33.9 5.9 4.9 4.8 1.5 1.2 1.0 26.8 26.6 22.4Sector Aggregate 10.9 9.0 8.0 1.9 1.5 1.3 17.1 16.2 16.2PULL OUT31 December 200846

MOSL UniverseReady reckoner: quarterly performanceCMP (RS) RECO SALES EBITDA NET PROFIT31.12.08 DEC.07 DEC.08 CHG. (%) DEC.07 DEC.08 CHG. (%) DEC.07 DEC.08 CHG. (%)AutomobilesBajaj Auto 391 Buy 25,013 19,925 -20.3 3,670 2,291 -37.6 2,511 1,476 -41.2Hero Honda 805 Buy 27,431 29,246 6.6 3,826 3,741 -2.2 2,750 2,998 9.0Mahindra & Mahindra 275 Buy 29,402 24,458 -16.8 3,315 2,079 -37.3 2,837 1,355 -52.2Maruti Suzuki 520 Buy 47,594 42,403 -10.9 6,986 4,064 -41.8 4,670 2,116 -54.7Tata Motors 159 Neutral 72,518 50,471 -30.4 8,197 3,533 -56.9 4,156 142 -96.6Sector Aggregate 201,958 166,502 -17.6 25,993 15,707 -39.6 16,925 8,086 -52.2CementACC 478 Neutral 17,218 18,226 5.9 4,154 3,884 -6.5 3,083 2,613 -15.3Ambuja Cements 70 Neutral 14,687 15,968 8.7 4,884 4,210 -13.8 2,797 2,849 1.8Birla Corporation 129 Buy 4,329 4,532 4.7 1,506 1,088 -27.8 1,065 734 -31.0Grasim Industries 1,218 Buy 26,299 25,780 -2.0 8,563 5,639 -34.2 5,511 3,223 -41.5India Cements 97 Buy 7,379 7,924 7.4 2,449 2,577 5.2 1,271 1,319 3.9Shree Cement 460 Buy 5,236 6,395 22.1 2,253 1,841 -18.3 350 948 170.5UltraTech Cement 383 Buy 13,821 16,054 16.2 4,685 3,710 -20.8 2,795 1,899 -32.1Sector Aggregate 88,968 94,879 6.6 28,493 22,948 -19.5 16,872 13,585 -19.5EngineeringABB 453 Neutral 18,394 21,538 17.1 2,602 2,661 2.3 1,808 1,769 -2.2Bharat Electronics 752 Buy 6,622 7,307 10.3 1,269 1,388 9.4 1,130 1,176 4.1BHEL 1,362 Neutral 49,641 63,582 28.1 8,677 10,960 26.3 6,875 8,777 27.7Crompton Greaves 135 Neutral 9,152 10,836 18.4 1,160 1,365 17.7 629 855 36.0Cummins India 222 Buy 5,902 7,496 27.0 985 1,237 25.5 746 873 17.0Larsen & Toubro 774 Neutral 63,827 79,068 23.9 7,551 9,672 28.1 5,148 5,721 11.1Siemens 287 Neutral 19,195 20,164 5.1 1,548 2,111 36.4 1,090 1,370 25.7Suzlon Energy 62 Neutral 31,698 37,050 16.9 3,889 4,446 14.3 1,517 1,328 -12.5Thermax 180 UR 8,454 10,255 21.3 1,049 1,217 16.0 750 856 14.1Sector Aggregate 212,886 257,295 20.9 28,729 35,057 22.0 19,693 22,725 15.4FMCGAsian Paints 895 Buy 11,776 14,050 19.3 1,856 2,110 13.7 1,189 1,282 7.9Britannia 1,325 Buy 6,564 8,000 21.9 588 690 17.3 488 538 10.2Colgate 408 Buy 3,675 4,250 15.6 611 725 18.6 605 704 16.4Dabur 84 Neutral 6,497 7,675 18.1 1,163 1,285 10.5 945 1,046 10.7Godrej Consumer 139 Buy 2,728 3,260 19.5 568 620 9.1 430 500 16.2GSK Consumer 573 Buy 2,841 3,041 7.0 357 350 -2.0 275 252 -8.5Hind. Unilever 250 Neutral 36,874 45,421 23.2 5,642 7,083 25.5 5,540 6,386 15.3ITC 171 Buy 34,580 41,560 20.2 11,997 13,810 15.1 8,307 9,481 14.1Marico 56 Buy 5,062 6,350 25.4 643 740 15.2 428 480 12.3Nestle 1,453 Buy 8,957 10,800 20.6 1,576 1,872 18.7 984 1,168 18.7Tata Tea 602 Neutral 11,849 12,650 6.8 2,112 1,850 -12.4 821 700 -14.8United Spirits 886 Buy 8,890 10,785 21.3 1,708 2,020 18.3 882 1,060 20.2Sector Aggregate 140,292 167,841 19.6 28,821 33,155 15.0 20,893 23,596 12.9PULL OUT31 December 200847

MOSL UniverseReady reckoner: quarterly performanceCMP (RS) RECO SALES EBITDA NET PROFITInfrastructureB.L.Kashyap 245 UR 4,058 4,774 17.6 474 501 5.9 252 284 12.5Gammon India 79 Neutral 5,227 5,943 13.7 468 471 0.6 192 124 -35.6Hindustan Construction 51 Buy 7,500 9,150 22.0 968 1,215 25.5 197 259 31.7IVRCL Infra. 144 Buy 9,749 12,800 31.3 1,084 1,216 12.2 558 510 -8.6Jaiprakash Associates 83 Buy 9,000 13,471 49.7 2,230 3,686 65.3 1,560 1,545 -1.0Nagarjuna Construction 72 Buy 7,795 10,944 40.4 862 1,175 36.3 396 471 18.8Patel Engg. 175 Neutral 2,622 3,274 24.9 469 584 24.4 350 289 -17.5Simplex Infra. 174 Buy 7,040 10,299 46.3 705 1,040 47.5 220 278 26.2Sector Aggregate 52,990 70,656 33.3 7,261 9,889 36.2 3,726 3,759 0.9MediaDeccan Chronicle 44 Buy 2,162 2,435 12.6 1,413 779 -44.9 1,029 443 -57.0H T Media 72 Buy 3,194 3,520 10.2 592 429 -27.5 369 224 -39.1Jagran Prakashan 59 Buy 1,990 2,300 15.6 432 460 6.5 258 275 6.4Sun TV 181 Neutral 2,178 2,650 21.7 1,710 2,094 22.4 1,023 1,256 22.8TV Today 79 Buy 694 825 18.9 244 290 18.8 167 185 11.2Zee Entertainment 140 Neutral 5,182 5,850 12.9 1,569 1,925 22.7 1,097 1,388 26.5Sector Aggregate 15,400 17,580 14.2 5,960 5,977 0.3 3,943 3,771 -4.4MetalsHindalco 52 Sell 45,317 41,052 -9.4 8,006 6,233 -22.1 5,427 3,103 -42.8Hindustan Zinc 338 Buy 16,580 13,238 -20.2 10,440 4,597 -56.0 7,850 4,984 -36.5Jindal Steel & Power 912 Buy 13,956 18,295 31.1 5,324 5,929 11.4 3,191 3,201 0.3JSW Steel 230 Neutral 28,419 32,368 13.9 7,841 2,843 -63.7 3,735 -579 PLNalco 190 Sell 11,093 11,534 4.0 4,401 4,254 -3.3 3,294 3,090 -6.2Sterlite Inds. 261 Buy 52,332 38,684 -26.1 15,717 10,432 -33.6 8,553 8,433 -1.4SAIL 77 Sell 95,333 100,458 5.4 30,641 5,548 -81.9 19,732 3,945 -80.0Tata Steel 217 Buy 318,985 332,717 4.3 39,428 18,658 -52.7 12,520 -4,866 P to LSector Aggregate 582,016 588,346 1.1 121,796 58,494 -52.0 64,303 21,312 -66.9Oil & GasBPCL 376 Buy 289,284 236,514 -18.2 4,371 7,273 66.4 1,863 1,405 -24.6Cairn India 172 Buy 2,667 2,140 -19.8 1,439 1,391 -3.3 -139 1,341 LPChennai Petroleum 128 Buy 70,609 57,347 -18.8 4,112 -641 PL 2,037 -1,479 PLGAIL 206 Buy 42,983 46,708 8.7 8,723 4,855 -44.3 6,213 3,425 -44.9HPCL 273 Buy 271,170 230,108 -15.1 1,481 5,202 251.3 -989 -26 -97.4Indraprastha Gas 102 Neutral 1,827 2,195 20.1 780 852 9.2 450 490 8.9IOC 426 Buy 640,127 497,807 -22.2 29,675 16,379 -44.8 23,576 6,960 -70.5MRPL 41 Sell 81,383 53,485 -34.3 5,480 -282 PL 3,381 -1,272 PLONGC 668 Neutral 151,208 153,114 1.3 80,318 84,434 5.1 43,665 46,262 5.9Reliance Inds. 1,230 Buy 345,900 397,156 14.8 58,330 55,934 -4.1 38,820 33,945 -12.6Sector Aggregate 1,897,160 1,676,574 -11.6 194,709 175,400 -9.9 118,877 91,052 -23.4PharmaceuticalsAventis Pharma 953 Buy 2,040 2,093 2.6 290 318 9.8 270 301 11.5Biocon 117 Buy 2,370 4,201 77.2 591 781 32.3 530 271 -48.8Cadila Health 268 Buy 5,794 7,116 22.8 1,035 1,341 29.5 549 630 14.7Cipla 187 Neutral 11,045 12,920 17.0 2,623 2,722 3.8 2,107 1,502 -28.7Dishman Pharma 139 Buy 2,066 2,650 28.3 398 599 50.2 321 128 -60.2Divis Labs 1,339 Buy 2,842 3,723 31.0 1,121 1,772 58.1 1,007 1,515 50.6Tata Steel and Sterlite numbers are consolidated.31.12.08 DEC.07 DEC.08 CHG. (%) DEC.07 DEC.08 CHG. (%) DEC.07 DEC.08 CHG. (%)PULL OUT31 December 200848

MOSL UniverseReady reckoner: quarterly performancePharmaceuticals (Contd.)Dr Reddy’ s Labs 470 Buy 12,321 14,978 21.6 1,383 2,069 49.6 -851 1,289 LPGlenmark Pharma 295 Neutral 6,794 6,447 -5.1 3,589 2,066 -42.4 2,800 1,319 -52.9GSK Pharma 1,147 Buy 3,392 3,719 9.6 932 1,048 12.4 829 911 9.9Jubiliant Organosys 119 Buy 6,416 9,833 53.3 1,295 1,948 50.4 911 573 -37.1Lupin 618 Buy 7,213 9,066 25.7 1,215 1,629 34.1 1,060 1,074 1.3Piramal Healthcare 239 Buy 7,323 8,650 18.1 1,212 1,720 41.9 778 976 25.4Ranbaxy Labs 252 Neutral 19,007 20,436 7.5 2,961 2,038 -31.2 1,709 770 -55.0Sun Pharma 1,065 Buy 7,902 10,964 38.7 3,547 4,740 33.7 3,184 4,590 44.2Wockhardt 108 Neutral 7,620 9,271 21.7 1,900 2,016 6.1 997 488 -51.0Sector Aggregate 104,145 126,066 21.0 24,091 26,806 11.3 16,200 16,337 0.8Real EstateDLF 282 Buy 35,984 32,481 -9.7 25,014 18,027 -27.9 21,450 13,913 -35.1Unitech 41 Neutral 11,421 8,793 -23.0 7,344 4,133 -43.7 5,232 2,004 -61.7Sector Aggregate 47,405 41,274 -12.9 32,358 22,160 -31.5 26,682 15,918 -40.3RetailingPantaloon Retail 218 Buy 12,268 18,200 48.4 1,096 1,690 54.2 317 439 38.7Titan Industries 927 Neutral 8,024 10,600 32.1 501 725 44.8 308 384 24.5Sector Aggregate 20,291 28,800 41.9 1,597 2,415 51.2 625 823 31.7TelecomBharti Airtel 715 Buy 69,639 96,684 38.8 29,634 39,679 33.9 17,224 22,529 30.8Idea Cellular 53 Neutral 17,081 26,452 54.9 5,672 6,844 20.7 2,368 2,086 -11.9Reliance Comm 227 Buy 48,742 60,400 23.9 21,065 24,366 15.7 13,952 12,807 -8.2Sector Aggregate 135,462 183,536 35.5 56,371 70,889 25.8 33,544 37,422 11.6TextilesAlok Ind 18 Buy 5,508 6,581 19.5 1,348 1,591 18.1 488 371 -24.0Arvind Mills 18 Neutral 5,368 6,222 15.9 619 653 5.6 65 7 -89.5Raymond 107 Neutral 3,321 4,077 22.8 193 546 183.8 99 242 145.2Vardhman Textiles 59 Buy 6,119 6,855 12.0 901 973 8.1 401 116 -71.0Sector Aggregate 20,316 23,734 16.8 3,060 3,764 23.0 1,053 736 -30.1UtilitiesCESC 238 Neutral 6,760 7,335 8.5 1,550 1,522 -1.8 930 840 -9.7NTPC 181 Neutral 93,308 104,060 11.5 29,691 29,345 -1.2 19,898 19,490 -2.0PTC India 69 Buy 7,338 13,134 79.0 16 61 272.7 62 263 324.8Reliance Infrastructure 580 Buy 15,055 21,830 45.0 741 2,947 297.5 1,409 2,201 56.2Tata Power 748 Neutral 14,194 18,452 30.0 2,682 3,598 34.2 1,496 1,396 -6.7Sector Aggregate 136,655 165,271 20.9 34,680 37,480 8.1 23,795 24,197 1.7UR - Under ReviewCMP (RS) RECO SALES EBITDA NET PROFIT31.12.08 DEC.07 DEC.08 CHG. (%) DEC.07 DEC.08 CHG. (%) DEC.07 DEC.08 CHG. (%)PULL OUT31 December 200849

MOSL UniverseReady reckoner: quarterly performanceCMP (RS) RECO SALES EBITDA NET PROFIT31.12.08 DEC.07 DEC.08 CHG. (%) DEC.07 DEC.08 CHG. (%) DEC.07 DEC.08 CHG. (%)OthersBlue Star 152 Buy 5,149 6,436 25.0 557 690 23.8 354 418 17.9Bombay Rayon 125 Buy 2,438 3,859 58.3 579 910 57.1 346 489 41.4Everest Kanto 181 Buy 1,255 2,372 88.9 460 664 44.5 292 356 22.1Great Offshore 220 Buy 2,017 2,846 41.2 1,088 1,267 16.4 551 572 3.7Greaves Cotton 73 Buy 3,004 3,275 9.0 429 406 -5.5 295 216 -26.8United Phosphorous 108 Buy 8,094 10,215 26.2 1,466 1,941 32.4 485 794 63.6Sector Aggregate 19,940 26,157 31.2 3,491 4,611 32.1 1,772 2,273 28.3CMP (RS) RECO SALES EBITDA NET PROFIT31.12.08 SEP.08 DEC.08 CHG. (%) SEP.08 DEC.08 CHG. (%) SEP.08 DEC.08 CHG. (%)Information TechnologyHCL Technologies 115 Buy 23,693 25,790 8.8 5,311 5,766 8.6 3,358 3,924 16.9Infosys 1,118 Buy 54,180 58,270 7.5 17,940 19,308 7.6 14,320 15,391 7.5MphasiS 156 Buy 8,361 9,594 14.8 1,771 1,880 6.1 1,411 1,220 -13.6Patni Computer 129 Neutral 8,523 8,789 3.1 1,399 1,594 13.9 1,129 987 -12.5Satyam Computer 170 UR 28,193 30,536 8.3 6,509 7,230 11.1 5,809 6,182 6.4TCS 478 Buy 69,534 75,250 8.2 18,197 19,512 7.2 12,615 15,202 20.5Tech Mahindra 248 Neutral 11,648 12,458 7.0 3,261 2,746 -15.8 2,354 2,281 -3.1Wipro 234 Buy 56,779 61,140 7.7 10,371 11,804 13.8 8,221 9,602 16.8Sector Aggregate 260,910 281,827 8.0 64,759 69,840 7.8 49,216 54,789 11.3CMP (RS) RECO NET INT INCOME OPERATING PROFIT NET PROFIT31.12.08 DEC.07 DEC.08 CHG. (%) DEC.07 DEC.08 CHG. (%) DEC.07 DEC.08 CHG. (%)BanksAndhra Bank 55 Buy 3,498 4,146 18.5 2,883 3,025 4.9 1,590 2,008 26.3Axis Bank 505 Buy 7,473 9,619 28.7 6,723 7,882 17.2 3,068 4,047 31.9Bank of Baroda 280 Buy 9,975 13,114 31.5 9,324 10,591 13.6 5,010 5,616 12.1Bank of India 288 Buy 10,795 14,048 30.1 9,714 13,198 35.9 5,119 7,197 40.6Canara Bank 188 Buy 9,344 11,690 25.1 7,578 9,440 24.6 4,588 5,908 28.8Corporation Bank 189 Buy 3,337 4,154 24.5 2,776 3,879 39.8 1,909 2,327 21.9Federal Bank 162 Buy 2,037 3,290 61.5 1,676 3,140 87.3 1,029 1,359 32.0HDFC 1,488 Buy 8,344 9,082 8.8 7,646 8,142 6.5 5,554 5,995 7.9HDFC Bank 998 Buy 14,376 19,722 37.2 10,664 13,344 25.1 4,294 6,150 43.2ICICI Bank 448 Buy 19,597 20,659 5.4 22,587 23,424 3.7 12,303 9,934 -19.3Indian Bank 137 Buy 5,617 6,878 22.4 4,632 6,128 32.3 3,075 3,742 21.7Indian Overseas Bank 72 Buy 6,560 8,128 23.9 4,931 7,703 56.2 3,082 3,782 22.7J&K Bank 355 Buy 2,013 2,721 35.2 1,679 2,196 30.8 1,091 1,330 21.9Karnataka Bank 79 Buy 1,158 1,454 25.6 1,215 1,387 14.1 690 807 16.9Oriental Bank of Commerce 154 Neutral 4,024 5,027 25.0 2,967 4,732 59.5 1,997 2,719 36.1Punjab National Bank 526 Buy 14,242 17,548 23.2 9,912 12,378 24.9 5,413 6,953 28.5State Bank 1,288 Buy 42,564 56,055 31.7 36,597 44,559 21.8 18,086 24,292 34.3Union Bank 163 Buy 7,522 9,778 30.0 6,363 8,178 28.5 3,649 5,263 44.2Sector Aggregate 172,474 217,114 25.9 149,866 183,324 22.3 81,548 99,428 21.9PULL OUT31 December 200850

Results PreviewQUARTER ENDING DECEMBER 2008AutomobilesBSE Sensex: 9,647 S&P CNX: 2,959 31 December 2008COMPANY NAMEBajaj AutoHero HondaMahindra & MahindraMaruti Suzuki IndiaTata MotorsSevere decline in 3QFY09 volume: Auto companies reported severe decline in volumesin October-November 2008, with the decline across all segments being impacted bymacro headwinds. Commercial vehicles segment was the worst hit, with decline of 42%in volumes, being impacted by 58% decline in M&HCV volumes and 28% decline in theLCV segment. 2-wheeler volume fell by 10%, with domestic volumes declining 15%whereas exports grew by 44%. Car volumes grew by 1.8%, with 96% growth in exports,but 13% decline in domestic sales.Benefit of low commodity prices from 4QFY09: While prices of key raw materialsviz. steel (~9%), aluminum (~33%) and rubber (~41%), have softened on QoQ basis,auto companies are expected to benefit only from 4QFY09, as they have inventories/contracts. As a result, we estimate margins to be under pressure for the industry in3QFY09, being impacted by higher raw material cost and negative operating leverage.We estimate margins for the MOSL universe to decline by 240bp to 8.6%.EXPECTED QUARTERLY PERFORMANCE SUMMARYRECO SALES EBITDA NET PROFIT(RS MILLION)DEC.08 CHG. (%) DEC.08 CHG. (%) DEC.08 CHG. (%)AutomobilesBajaj Auto Buy 19,925 -20.3 2,291 -37.6 1,476 -41.2Hero Honda Buy 29,246 6.6 3,741 -2.2 2,998 9.0Mahindra & Mahindra Buy 24,458 -16.8 2,079 -37.3 1,355 -52.2Maruti Suzuki Buy 42,403 -10.9 4,064 -41.8 2,116 -54.7Tata Motors Neutral 50,471 -30.4 3,533 -56.9 142 -96.6Sector Aggregate 166,502 -17.6 15,707 -39.6 8,086 -52.2Jinesh K Gandhi (Jinesh@MotilalOswal.com); Tel +91 22 39825416Recent stimulus package by the government to boost demand: The auto industrywould benefit from the recent government announcements on fiscal (4% CENVAT ratecut), monetary (rate reduction) and fuel price cuts. Lowering of excise and consequentreduction in end vehicle price is not expected to revive demand, until availability offinance is eased. Availability of finance is expected to improve with the cut in repo rateby 250bp and a 100bp cut in reverse repo rate in last two months. Measures adopted bythe RBI to ease liquidity are expected to solve financing issues for the auto industry,albeit with a lag of 3-6 months.Valuation and view: Volume growth in domestic markets across all categories (except2-wheelers) has been slowing down. The stimulus package is expected to drive volumesfor the industry, albeit with a lag of 3-6 months. Valuations in the sector remain attractiveconsidering the positive long-term business outlook. A challenging macro environmentcoupled with weakening consumer sentiment would impact demand in the short term.However, there are re-rating triggers for the sector in form of a) lower material cost, b)lower interest cost/availability of finance, c) lower fuel cost and d) strong FY10 EPSgrowth on low base. Our top picks are Hero Honda and Bajaj Auto.31 December 200851

Automobiles3QFY09: Macro headwinds impact volumesImpacted by macro headwinds, auto companies have reported a severe volume decline inOctober-November 2008, the decline being across all segments. Total aggregate volumesdeclined 10%, with domestic volumes reducing 16% and export volumes growing 49%.? 2-wheeler volumes de-grew by 10%, with domestic volumes declining 14.6% whereasexports grew by 43.6%. Hero Honda was least impacted with 3% de-growth involumes, while TVS Motor reported 12% lower growth and Bajaj Auto’s 2-wheelervolumes declined 33%.? Car volumes grew by 1.8%, driven by 96% growth in export volumes. However,domestic car sales declined by 13% being impacted by macro headwinds. Decline inMaruti Suzuki was 19%, for Tata Motors, 2.5% and M&M, 60%. Higher interestrates and tight credit had a visible impact on the small car segment.? Commercial vehicles segment was the worst hit, with decline of 42% in volumes,being impacted by 58% decline in M&HCV volumes and 27.6% decline in the LCVsegment. In the domestic market, CV volumes declined by 43%, whereas exportvolumes declined by 34%. Tata Motor’s CV sales de-grew by 38%, whereas AshokLeyland registered a 55% decline.AUTO VOLUMES SNAPSHOT FOR APRIL - NOVEMBER FY09 ('000 UNITS)OCT-NOV’08 OCT-NOV’07 % GR. FY09YTD FY08YTD % GR.Domestic SalesMotorcycles 970 1,198 -19.1 4,033 3,920 2.9Two wheelers 1,246 1,459 -14.6 5,110 4,924 3.8Three wheelers 56 66 -14.8 241 249 -3.3Passenger cars 197 226 -13.0 852 841 1.3UVs 29 43 -32.3 152 153 -0.3M&HCV 16 40 -58.9 111 137 -19.1LCV 29 39 -26.4 134 135 -0.6Total 1,573 1,873 -16.0 6,601 6,440 2.5Export SalesMotorcycles 175 122 43.8 677 504 34.3Two wheelers 182 127 43.6 702 536 31.0Three wheelers 34 24 40.1 104 93 11.5Passenger cars 68 32 112.3 223 132 69.4UVs 0 1 -33.1 3 4 -34.4M&HCV 1 2 -31.3 6 8 -16.8LCV 4 6 -35.1 22 22 -3.6Total 289 191 51.2 1,059 795 33.3Total SalesMotorcycles 1,144 1,320 -13.3 4,710 4,424 6.5Two wheelers 1,428 1,585 -9.9 5,812 5,460 6.4Three wheelers 90 90 -0.1 345 342 0.7Passenger cars 264 258 2.4 1,075 972 10.5UVs 30 44 -32.4 155 157 -1.2M&HCV 18 42 -57.7 117 145 -19.0LCV 33 45 -27.6 156 157 -1.0Total 1,862 2,064 -9.8 7,660 7,234 5.9Source: SIAM31 December 200852

AutomobilesBenefit of low commodity prices from 4QFY09: While prices of key raw materialsviz. steel, aluminum and rubber, have softened by 10-54% from the peak, auto companiesare expected to benefit only from 4QFY09, as they have inventories/contracts. As a result,we estimate margins to be under pressure for the industry in 3QFY09, owing to the impactof higher raw material cost and lower operating leverage.TREND IN COMMODITY PRICES (INDEX)STEEL - HRC (RS/TON)34,167(15.8%)34,833(10.9%)34,250(6.2%)37,975(13.8%)45,033(31.8%)44,415(27.5%)40,632(18.6%)1QFY082QFY083QFY084QFY081QFY092QFY093QFY09COPPER (US$/TON)7,678 8,087(3.4%)(6.9%)6,642(5.3%)8,510 8,693 7,684(23.0%) (13.2%)-(5.0%)4,052-(39.0%)1QFY082QFY083QFY084QFY081QFY092QFY093QFY09ZINC (US$/TON)3,339(3.1%)3,063-(7.9%)2,354-(45.1%)2,293-(29.6%)1,903 1,781-(43.0%)-(41.9%)1,205-(48.8%)1QFY082QFY083QFY084QFY081QFY092QFY093QFY09Source: Bloomberg/Industry31 December 200853

AutomobilesALUMINIUM (US$/TON)2,676(3.3%)2,466-(3.4%)2,358-(16.7%)2,941 3,065(14.5%)(6.2%)2,790(13.2%)1,872-(20.6%)1QFY082QFY083QFY084QFY081QFY092QFY093QFY09RUBBER (BAHT/KG)79-(24.6%)73-(3.0%)9083(45.4%) (10.6%)110 102(38.7%) (40.6%)60-(27.1%)1QFY082QFY083QFY084QFY081QFY092QFY093QFY09Source: Bloomberg/IndustryWe estimate margins for the MOSL universe to decline by 240bp to 8.6%, with the largestimpact on Maruti (~510bp) and Tata Motors (~430bp). However, Hero Honda would belargely insulated on account of ramp-up at Haridwar and sourcing of raw material on aspot basis.MARGINS TO REMAIN UNDER PRESSUREDEC-08 DEC-07 YOY (BP) SEP-08 QOQ (BP)Bajaj Auto 11.5 14.7 -320 12.0 -50Hero Honda 12.6 13.9 -130 10.3 230Mahindra & Mahindra 8.5 11.3 -280 12.1 -360Maruti Suzuki 9.6 14.7 -510 7.7 190Tata Motors 7.0 11.3 -430 10.2 -320Auto Sector Aggregate 8.6 11.0 -240 10.4 -180Source: MOSLForex fluctuation continues to have a destabilizing effectExchange rate fluctuation has led to concerns over export revenue realization and cost ofimported inputs, and the effectiveness of hedging practices being followed by companies.While the rupee has depreciated considerably versus major currencies, its impact wouldvary depending upon the hedging strategies deployed by respective companies.31 December 200854

AutomobilesTREND IN RUPEE MOVEMENT (INDEX)120USD Euro GBP JPYYOYQOQUSD 21.5 1.9JPY 50.3 19.8EUR 17.2 1.8GBP -9.1 -15.01101009080Jun-06Sep-06Dec-06Mar-07Jun-07Sep-07Dec-07Mar-08Jun-08Sep-08Source: BloombergBurden of excise cut on inventory not known yetExcise duty cut of 4% would result in losses on the inventory for the industry, as prices ofexisting inventory would be lowered to pass-on the benefit to the consumer. There hasbeen no clarity with respect to bearing of losses on inventory. While losses on inventorywould be accounted for in 3Q and 4Q, our estimates does not factor in for the same due tolack of clarity. We estimate impact of 3%-15% on FY09E EPS, if the companies bearentire loss.LOSS ON INVENTORY DUE TO EXCISE DUTY CUTCOMPANY FY09 DOMESTIC INVENTORY IMPACT OF % OF FY09VOLUMES (UNITS) DAYS EXCISE (RS M) EPSHero Honda 3,603,675 30 433 2.7Bajaj Auto 2,206,508 35 363 3.5Maruti 634,630 35 714 4.2Tata Motors 476,295 45 1,376 15.5M&M 284,088 40 558 6.2Source: MOSLDowngrading estimatesWe are lowering our earnings estimates for all the companies to factor in lower volumesand consequent negative operating leverage, reduction in excise exemption benefit due tocut in excise duty, and lower interest income. While we have lowered volumes for all autocompanies except Hero Honda, reduction in excise duty benefit would hurt Hero Honda,and to some extent, Bajaj Auto.REVISED EARNINGS ESTIMATES (RS)31 December 2008FY09EFY10EREV OLD CHG (%) REV OLD CHG (%)Bajaj Auto 49.4 53.2 -7.2 62.1 63.5 -2.2Hero Honda 59.5 63.5 -6.4 76.0 82.0 -7.3Maruti 42.2 46.4 -9.2 48.7 51.7 -5.9M&M 58.7 66.4 -11.7 70.6 81.0 -12.9Tata Motors 14.8 23.3 -36.8 22.8 26.3 -13.5Source: MOSL55

AutomobilesSector outlook remains positiveThe auto sector put forth mixed performance in FY08. While M&HCV, tractors, threewheelerand two-wheeler volumes were lower, LCVs and passenger vehicles continuedto register robust growth. In FY09, while concerns over higher input costs, volatility inforeign currency exchange rates and higher interest rates pose sizeable risks to sectorperformance, we remain bullish on the auto sector for the following reasons:? A revival in auto volumes will also result in economies of scale for most companiesover their expanded capacities. Moreover, the leading companies have successfullyundertaken cost reduction and productivity improvement programs, which will helppartially offset the pressures from rising input prices.? Ramping up of operations in tax-free zones like Uttaranchal will help counter costpressures through lower tax burden. Auto majors like Tata Motors, Bajaj Auto, TVSMotor, Hero Honda and Ashok Leyland have respectively set up plants in the taxexemptregion of Uttaranchal. All the companies have commenced their operations atthese plants. As volumes are ramped up further at these tax-exempt locations, autocompanies will be in even better positions to take further advantage of these taxbenefits offered and thereby counter cost pressures. The recent excise duty cut from16% to 12% on two and three wheelers and small cars will also help companies likeMaruti Suzuki, Bajaj Auto, Hero Honda and M&M to boost demand.? The exports market is yet to be fully tapped by Indian auto manufacturers; this segmentmay become a further volume growth driver for the industry. Companies like Maruti,Tata Motors, M&M, and Bajaj Auto are in a position to further increase their exportsby tapping newer destinations and increasing penetration in their existing markets.? The recent stimulus package by the government would boost demand in the mediumterm. The auto industry would benefit from the recent announcements on fiscal(CENVAT rate cut), monetary (rate reduction) and fuel price cuts. While thesemeasures would be beneficial for the industry in the long run, it is not expected torevive demand in the short term.Valuation and viewVolume growth in domestic markets across all categories (except 2-wheelers) has beenslowing down, owing to significant increase in the cost of ownership based on high interestrates and higher cost of fuel. The stimulus package is expected to drive volumes for theindustry, albeit with a lag of 3-6 months. Valuations in the sector remain attractive consideringthe positive long-term business outlook. A challenging macro environment coupled withweakening consumer sentiment would impact demand in the short term. However, thereare re-rating triggers for the sector in form of a) lower material cost, b) lower interestcost/availability of finance, c) lower fuel cost and d) strong FY10 EPS growth on lowbase. Our top picks are Hero Honda, Maruti and Bajaj Auto.31 December 200856

AutomobilesStock performance and valuationsSTOCK PERFORMANCE (%)ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARAutomobilesBajaj Auto -35 - -10 - -3 -Hero Honda -7 15 18 68 24 65Mahindra & Mahindra -46 -68 -21 -16 -15 -18Maruti Suzuki -24 -47 1 5 7 2Tata Motors -54 -78 -29 -25 -23 -28RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)110SensexMOSL Automobiles Index103MOSL Automobiles IndexSensex95888073655850Sep-08 Oct-08 Nov-08 Dec-0843Dec-07 Mar-08 Jun-08 Sep-08 Dec-08CMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EAutomobilesBajaj Auto 391 Buy 57.0 49.4 62.1 6.9 7.9 6.3 3.9 4.3 3.1 47.6 37.2 37.9Hero Honda 805 Buy 48.5 59.5 76.0 16.6 13.5 10.6 10.0 8.5 6.1 35.5 35.8 36.9Mahindra & Mahindra 275 Buy 64.5 58.7 70.6 4.3 4.7 3.9 3.1 5.0 4.8 20.7 15.3 16.8Maruti Suzuki 520 Buy 59.2 42.2 48.7 8.8 12.3 10.7 4.0 5.4 4.3 20.6 12.6 13.2Tata Motors 159 Neutral 36.1 14.8 18.4 4.4 10.8 8.6 2.7 5.1 5.2 21.6 9.8 11.2Sector Aggregate 8.6 11.4 9.4 4.4 5.7 4.8 24.2 16.8 18.331 December 200857

Results PreviewSECTOR: AUTOMOBILESBajaj AutoSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGBJAUT INREUTERS CODEBJAT.BO31 December 2008Previous Recommendation: BuyBuyRs391Equity Shares (m) 144.752-Week Range (Rs) 945/2951,6,12 Rel.Perf.(%) 16/15/-M.Cap. (Rs b) 56.6M.Cap. (US$ b) 1.0YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/08A 90,462 8,241 57.0 6.9 3.6 47.6 42.4 0.6 3.93/09E 87,482 7,140 49.4 -13.4 7.9 2.9 37.2 32.4 0.5 4.33/10E 95,107 8,991 62.1 25.9 6.3 2.4 37.5 35.6 0.4 3.1? Total volumes of Bajaj Auto are expected to decrease by 29.5% YoY in 3QFY09. Volumes in 3Q have been impactedby 47% decline in the domestic market, but exports have grown 34%. 2W volumes are estimated to decline by 33%,whereas 3W volumes are estimated to grow by 4%.? We estimate net sales of Rs19.9b, a decline of 20%. Realizations are estimated to improve by 16% YoY, reflectinghigher 3W sales. EBITDA margin is expected to decline by 190bp to 11.5%, due to higher RM cost and subventionexpenses. We estimate EBITDA at Rs2.3b (decrease of 38% QoQ) and adj. PAT at Rs1.5b (decline of 41%).? The company indicated that it plans to launch a new motorcycle each month for 6 months beginning January 2009.Further, it plans to launch two new 3Ws, one each in the passenger and the goods segments.? We have revised our earnings estimates downward by 7.2% to Rs49.4 for FY09E and by 0.4% to Rs62.1 for FY10Eto factor in lower volumes, subvention related expenses, and lower other income. The stock is trading at 7.9x FY09Eand 6.3x FY10E EPS. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QETotal Volumes (nos) 571,591 614,093 713,622 552,101 620,095 640,040 503,337 480,443 2,451,407 2,243,915Net Sales 21,087 23,618 25,013 20,744 23,108 25,484 19,925 18,965 90,462 87,482Change (%) -3.0 9.6 7.9 -20.3 -8.6 -3.3Total Cost 18,264 19,791 21,343 17,969 20,440 22,046 17,635 16,477 77,366 76,597EBITDA 2,823 3,827 3,670 2,776 2,668 3,439 2,291 2,488 13,095 10,885EBITDA Margins (%) 13.4 16.2 14.7 13.4 11.5 13.5 11.5 13.1 14.5 12.4Other Income 333 260 430 205 288 221 230 311 1,227 1,050Extraordinary Expenses 0 77 437 671 0 611 611 611 1,185 1,833Interest 1 14 19 18 9 59 65 67 52 200Depreciation 415 492 418 414 335 331 340 381 1,740 1,387PBT 2,740 3,581 3,225 1,878 2,611 2,659 1,505 1,740 11,346 8,515Tax 910 1,195 1,013 670 860 810 455 515 3,788 2,640Effective Tax Rate (%) 33.2 33.4 31.4 35.7 32.9 30.5 30.3 29.6 33.4 31.0Rep. PAT 1,830 2,386 2,212 1,208 1,751 1,849 1,049 1,226 7,558 5,875Change (%) -28.0 -4.3 (22.5) -52.5 1.5 -22.3Adj. PAT 1,830 2,438 2,511 1,639 1,751 2,274 1,476 1,656 8,347 7,140Change (%) -23.2 -4.3 (6.7) -41.2 1.0 -14.5E: MOSL EstimatesJinesh K Gandhi (Jinesh@MotilalOswal.com); Tel +91 22 3982541631 December 200858

Results PreviewSECTOR: AUTOMOBILESHero HondaSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGHH INREUTERS CODEHROH.BO31 December 2008Previous Recommendation:BuyBuyRs805Equity Shares (m) 199.752-Week Range 895/5611,6,12 Rel. Perf. (%) -6/46/68M.Cap. (Rs b) 160.8M.Cap. (US$ b) 3.0YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 99,000 8,579 43.0 -11.7 18.7 6.5 38.3 48.2 1.4 12.13/08A 103,318 9,679 48.5 12.8 16.6 5.4 35.5 45.7 1.3 10.03/09E 118,091 11,876 59.5 22.7 13.5 4.4 35.8 44.6 1.1 8.53/10E 124,981 15,177 76.0 27.8 10.6 3.5 36.9 45.6 0.9 6.1? Hero Honda’s volumes are estimated to decline by 3% in 3QFY09. It is least impacted, among all the 2-wheelercompanies, by slowdown in the automobile industry and has continuously gained share. Also, realizations are expectedto improve by 7.5% on account of price increases availed in 1HFY09 and higher sales from its Haridwar unit.? Net sales are estimated to increase by 6.6% YoY to Rs29.2b, while operating margins are likely to decline 110bp QoQto 12.8%, being impacted by higher commodity prices as well as impact of rupee depreciation on imports. However,higher other income and lower tax (due to ramp-up at Haridwar) would boost PAT growth to 9% to Rs3b.? Lowering of excise duty would lower the benefits of excise exemption for Hero Honda from its Haridwar plant; thebenefits would get lowered by 4% to 8.4% only. However, it will benefit from lower excise on input materials that arenot MODVAT-able on excise exempt products (we have not factored this in our estimates).? We are lowering our earnings estimates for FY09E by 6.4% to Rs59.5 and for FY10E by 7.3% to Rs76 to factor inlower volume growth, reduction in excise duty benefit at Haridwar, and lower other income. The stock is trading at13.5x FY09E EPS and 10.6x FY10E EPS. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QETotal Volumes (nos) 802,853 756,633 893,581 884,075 894,244 972,095 876,875 860,461 3,337,142 3,603,675Net Sales 24,480 23,521 27,431 27,887 28,435 31,897 29,246 28,513 103,318 118,091Change (%) 3.5 5.5 2.9 5.6 16.2 35.6 6.6 2.2 4.4 14.3Total Cost 21,845 20,606 23,605 23,768 25,025 27,672 25,505 24,729 89,824 102,931EBITDA 2,635 2,915 3,826 4,118 3,410 4,226 3,741 3,784 13,494 15,160As % of Sales 10.8 12.4 13.9 14.8 12.0 13.2 12.8 13.3 13.1 12.8Other Income 389 393 521 551 467 662 725 826 1,854 2,680Interest -90 -101 -87 -81 -50 -83 -85 -62 -358 -280Depreciation 376 384 408 435 422 466 472 499 1,603 1,860PBT 2,737 3,024 4,026 4,316 3,505 4,505 4,079 4,172 14,103 16,261Tax 839 980 1,276 1,329 777 1,442 1,081 1,086 4,424 4,385Effective Tax Rate (%) 30.6 32.4 31.7 30.8 22.2 32.0 26.5 26.0 31.4 27.0PAT 1,898 2,043 2,750 2,987 2,729 3,063 2,998 3,086 9,679 11,876Adj. PAT 1,898 2,043 2,750 2,987 2,729 3,063 2,998 3,086 9,679 11,876Change (%) -20.1 -5.4 31.5 47.1 43.7 49.9 9.0 3.3 11.8 22.7E: MOSL EstimatesJinesh K Gandhi (Jinesh@MotilalOswal.com); Tel +91 22 3982541631 December 200859

Results PreviewSECTOR: AUTOMOBILESSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGMM INREUTERS CODEMAHM.BO31 December 2008Previous Recommendation: BuyMahindra & MahindraBuyRs275Diluted Eq. Shares (m) 255.952-Week Range 872/2361,6,12 Rel.Perf.(%) -9/-15/-16M.Cap. (Rs b) 70.4M.Cap. (US$ b) 1.4YEAR NET SALES S/A PAT ADJ.EPS CONS. P/E CONS, ROE ROCE EV/ EV/END (RS M) (RS M) (RS) EPS (RS) (X) P/E (X) (%) (%) SALES EBITDA3/07A 99,874 9,198 35.9 55.1 7.6 5.0 25.9 22.3 0.5 3.83/08A 114,106 9,009 35.2 64.5 7.8 4.3 20.7 19.5 0.3 2.73/09E 111,734 7,137 27.9 58.7 9.9 4.7 15.3 13.0 0.4 4.53/10E 122,500 8,662 33.8 70.6 8.1 3.9 16.8 15.4 0.5 4.5? M&M is expected to report overall volume decline of 20% YoY in 3QFY09, as a severe decline in both UVs (~29%decline) and Tractors (~12% decline) impact volumes. However, the decline in 3W volumes is estimated to bemarginal.? Net sales is estimated to decline 17% YoY to Rs24.5b. Higher raw material cost would result in EBITDA margindecline of 280bp to 8.5%, resulting in a 37% decline in EBITDA to Rs2.9b and 52% decline in adjusted PAT toRs1.4b.? The company’s UV/PV portfolio is witnessing product fatigue. In PVs, the company is planning to launch a newvariant of Logan in the next couple of months. In UVs, the company plans to launch MPV ‘Xylo’ (i.e. ProjectIngenio) by December 2008, which is expected to drive growth for the company in the UV segment.? We are revising our consolidated estimates downward by 11.7% for FY09 to Rs58.7 and for FY10 by 12.9% toRs70.6 to factor in lower volumes and downgrade in subsidiary/associate earnings. On a consolidated basis, the stockis trading at 4.7x FY09E EPS of Rs58.7 and 3.9x FY10E EPS of Rs70.6. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QETotal Volumes (nos) 67,232 69,411 77,086 79,026 81,416 78,892 61,729 62,051 293,759 284,088Net Sales 26,128 27,041 29,402 31,482 31,952 30,930 24,458 24,395 114,106 111,734Change (%) 17.8 10.4 14.1 14.7 22.3 14.4 -16.8 -22.5 14.3 -2.1Total Cost 23,357 24,298 26,087 28,058 28,803 28,451 22,379 22,228 101,672 101,860EBITDA 2,771 3,812 3,315 3,424 3,301 2,929 2,079 2,167 12,434 9,874As % of Sales 10.6 13.6 11.3 10.9 10.3 9.3 8.5 8.9 10.9 8.8Change (%) 10.3 15.8 7.1 10.5 19.1 -23.2 -37.3 -36.7 3.6 -20.6Other income 316 605 401 273 447 1,143 415 229 1,682 2,234Extraordinary Income 0 109 1,571 156 0 534 0 0 2,656 534Extraordinary Expense 16 0 23 18 779 1,198 0 0 75 1,977Interest -51 82 72 139 81 153 150 150 242 533Gross Profit 3,122 4,444 5,192 3,697 2,888 3,255 2,344 2,246 16,454 10,131Less: Depreciation 571 577 590 649 617 639 650 664 2,387 2,569EO Expense 16 -109 -1,548 -139 779 665 0 0 -2,581 1,444PBT 2,551 3,867 4,601 3,048 2,271 2,616 1,694 1,582 14,068 7,562Tax 640 1,008 550 837 576 348 339 306 3,034 1,569Effective Tax Rate (%) 25.1 26.1 12.0 27.5 25.4 13.3 20.0 19.4 21.6 20.8Reported PAT 1,912 2,859 4,052 2,211 1,695 2,268 1,355 1,276 11,034 5,993Change (%) -6.4 -26.0 67.6 -6.3 -11.3 -20.7 -66.6 -42.3 3.3 -45.7Adj PAT 1,924 2,774 2,837 2,102 2,313 2,794 1,355 1,276 9,009 7,137Change (%) 3.1 12.2 17.1 -13.7 20.2 0.7 -52.2 -39.3 -4.9 -20.8E: MOSL EstimatesJinesh K Gandhi (Jinesh@MotilalOswal.com); Tel +91 22 3982541631 December 200860

Results PreviewSECTOR: AUTOMOBILESSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGMSIL INREUTERS CODEMRTI.BO31 December 2008Previous Recommendation: BuyMaruti Suzuki IndiaBuyRs520Diluted Equity Shares (m) 289.052-Week Range 1,009/4461,6,12 Rel.Perf.(%) -9/13/5M.Cap. (Rs b) 150.3M.Cap. (US$ b) 3.1YEAR TOTAL INC. PAT ADJ. EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 149,038 15,681 54.3 29.0 9.6 2.2 22.8 30.4 0.7 2.23/08A 182,599 17,100 59.2 9.1 8.8 1.8 20.6 26.7 0.6 1.83/09E 182,259 12,186 42.2 -28.7 12.3 1.6 12.6 16.9 0.6 1.63/10E 201,439 14,066 48.7 15.4 10.7 1.4 13.2 17.5 0.5 1.4? Maruti’s volumes are expected to decline 19% YoY in 3QFY09, owing to the impact of macro headwinds. This wouldbe the second consecutive quarter of decline in volumes. Volume decline is most evident in the small car segment, asthis segment is vulnerable to higher interest rates. However, growth in the A3 segment (Swift DZire and SX4) hasbeen strong, boosted by launch of Swift Dzire in March 2008.? Net sales are estimated to decline 11% to Rs42.4b, despite 10% improvement in realizations driven by better productmix. EBITDA margin is estimated to be lower by 510bp YoY to 9.6%, impacted by higher raw material prices and~20% depreciation of rupee against the yen. As a result, PAT is expected to decline by 55% to Rs2.1b.? The company plans to launch A-Star in India in mid-November and is expected to export this model from January2009. A-Star has received average response, with sale of about 10,000 units since launch on 17 November.? We have revised our earnings estimates downward by 9.2% to Rs42.2 for FY09E and by 5.9% to Rs48.7 for FY10Eto factor in lower volumes, lower interest income, and strong yen. The stock is trading at 12.3x FY09E and 10.7xFY10E earnings. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QETotal Volumes (nos) 169,669 191,325 201,623 202,225 192,584 189,451 162,701 156,174 764,842 700,910Net Sales 39,308 45,474 46,741 48,384 47,536 48,303 41,553 40,307 179,907 177,699Change (%) 25.8 33.0 27.0 9.2 20.9 6.2 -11.1 -16.7 0.2 -1.2Other Operating Income 833 1,314 853 2,088 1,052 1,634 850 1,025 4,396 4,561Total Income 40,141 46,787 47,594 50,472 48,588 49,936 42,403 41,332 184,785 182,259Total Cost 33,560 39,710 40,609 42,568 42,720 44,579 38,339 37,096 156,233 162,734EBITDA 6,580 7,077 6,986 7,904 5,868 5,357 4,064 4,236 28,553 19,525As % of Sales 16.4 15.1 14.7 15.7 12.1 10.7 9.6 10.2 15.5 10.7Change (%) 27.3 30.4 19.3 22.8 -10.8 -24.3 -41.8 -46.4 0.3 -31.2Non-Operating Income 1,400 786 853 772 2,236 960 850 877 3,974 4,923Extraordinary Expense 0 0 0 3,173 179 200 0 0 1,050 379Interest 151 140 144 161 168 208 195 194 596 765Gross Profit 7,829 7,722 7,695 5,342 7,756 5,910 4,719 4,919 28,589 23,304Less: Depreciation 822 881 867 988 1,661 1,658 1,675 1,692 5,682 6,686PBT 7,007 6,841 6,828 4,354 6,096 4,252 3,044 3,227 25,030 16,618Tax 2,011 2,176 2,158 1,377 1,437 1,290 928 1,022 7,722 4,678Effective Tax Rate (%) 28.7 31.8 31.6 31.6 23.6 30.3 30.5 31.7 30.9 28.2PAT 4,996 4,665 4,670 2,977 4,659 2,961 2,116 2,204 17,308 11,940Adjusted PAT 4,996 4,665 4,670 5,146 4,796 3,101 2,116 2,204 19,472 12,212Change (%) 35.2 25.6 26.9 -0.2 -4.0 -33.5 -54.7 -57.2 0.1 -32.3E: MOSL EstimatesJinesh K Gandhi (Jinesh@MotilalOswal.com); Tel +91 22 3982541631 December 200861

Results PreviewSECTOR: AUTOMOBILESSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGTTMT INREUTERS CODETAMO.BO31 December 2008Previous Recommendation: NeutralTata MotorsNeutralRs159Diluted Eq.Shares (m) 535.952-Week Range 790/1221,6,12 Rel. Perf. (%) 11/-33/-25M.Cap. (Rs b) 85.2M.Cap. (US$ b) 1.8YEAR SALES S/A PAT ADJ EPS CONS, P/E CONS. ROE ROCE EV/ EV/END (RS M) (RS M) (RS) EPS (RS) RATIO P/E (X) (%) (%) SALES EBITDA3/07A 274,048 18,963 35.4 40.2 4.5 4.0 27.6 27.1 0.2 2.13/08A 285,314 16,972 31.7 36.1 5.0 4.4 21.6 17.3 0.2 1.93/09E 243,495 7,582 14.1 14.8 11.2 10.8 9.8 10.6 0.4 4.93/10E 232,159 8,425 15.7 18.4 10.1 8.6 11.2 12.0 0.5 5.1? Tata Motors is estimated to post 29% volume decline in 3QFY09, being impacted by 38% decline in CV sales, 43%decline in UV sales and 2.5% decline in cars.? Net sales decline by 30% to Rs50.5b, as realization is estimated to decline by 2.5% due to lower CV sales. However,higher raw material cost and lower operating leverage would result in a 430bp decline in EBITDA margin to 7%.However, lower tax provisioning would restrict the fall in PAT to 97% to Rs142m.? Tata Motors has been severely impacted by macro headwinds as its CV business volumes have sharply declined,resulting in inventory build-up and forcing the company to cut production and shut down plants. Pick-up in CVvolumes would be key to improvement in its financials.? We are revising our consolidated earnings estimates downward by 37% to Rs14.8 for FY09E and by 30.2% toRs18.4 for FY10E to factor in severe lower volumes in all segments. The stock is trading at 10.8x FY09E consolidatedEPS and 8.6x FY10E consolidated EPS. Maintain Neutral.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QETotal Volumes (nos) 128,095 136,573 143,979 175,472 133,079 135,037 102,775 107,835 582,401 476,295Net Sales 60,568 63,952 72,518 88,276 69,284 70,293 50,471 52,951 285,314 243,495Change (%) 4.7 -2.7 6.3 7.3 14.4 9.9 -30.4 -40.0 4.1 -14.7Total Cost 55,105 58,778 64,321 79,557 63,980 65,035 46,938 48,745 257,761 224,698EBITDA 5,463 5,954 8,197 8,719 5,305 5,754 3,533 4,206 27,553 18,797EBITDA Margins (%) 9.0 9.3 11.3 9.9 7.7 8.2 7.0 7.9 9.7 7.7Change (%) -27.2 -23.5 -2.8 -4.7 -2.9 -3.4 -56.9 -51.8 -16.2 -31.8Non-Operating Income 863 705 268 1,608 2,020 705 300 1,048 3,444 4,073Forex Gain / (Loss) 2,059 309 275 -1,266 -1,999 -2,850 0 0 1,376 -4,849Extraordinary Income 20 1,994 650 718 1,136 3,588 0 0 3,382 4,724Interest 816 965 918 126 1,123 1,483 1,475 1,446 2,824 5,527Gross Profit 7,589 7,997 8,473 9,653 5,339 5,714 2,358 3,809 32,931 17,219Depreciation & Amort. 1,475 1,597 1,675 1,776 1,808 2,029 2,075 2,133 6,523 8,045Product Dev. Expenses 193 188 147 116 79 105 125 141 644 450PBT 5,921 6,212 6,651 7,761 3,451 3,580 158 1,535 25,765 8,724Tax 1,254 944 1,661 1,618 190 110 16 120 5,476 436Effective Tax Rate (%) 21.2 15.2 25.0 20.8 5.5 3.1 10.0 7.8 21.3 5.0PAT 4,668 5,268 4,991 6,143 3,261 3,470 142 1,415 20,289 8,288Change (%) 22.2 19.3 -2.8 6.5 -30.1 -34.1 -97.2 -77.0 6.0 -59.2Adj PAT 3,275 3,267 4,156 6,274 3,578 2,447 142 1,415 16,972 7,582Change (%) -27.3 -26.7 -5.7 12.2 9.3 -25.1 -96.6 -77.5 -14.6 -55.3E: MOSL EstimatesJinesh K Gandhi (Jinesh@MotilalOswal.com); Tel +91 22 3982541631 December 200862

Results PreviewQUARTER ENDING DECEMBER 2008BankingBSE Sensex: 9,647 S&P CNX: 2,959 31 December 2008COMPANY NAMEAndhra BankAxis BankBank of BarodaBank of IndiaCanara BankCorporation BankHDFCHDFC BankFederal BankICICI BankIndian BankIndian Overseas BankJ&K BankKarnataka BankOriental BankPunjab National BankState BankUnion BankMacro economic environment a mixed bagThe macro economic environment continues to be challenging with a significant fall inIIP numbers and exports, the impending economic slowdown over the next year, andfear of asset quality deterioration. However, with a sharp fall in crude oil and othercommodity prices, inflation is declining at a rapid pace, giving the much needed comfortfor the expansionary monetary policy. As a result, the stance of the monetary policy hasshifted from inflation to growth. During the quarter, the RBI cut CRR by 350bp to 5.5%;repo rates by 250bp to 6.5%; reverse repo rates by 100bp to 5%; and SLR by 100bp to24%, which led to improved liquidity situation and paved the way for lower interest ratesindustry wide.We expect margins to remain stable despite the PLR cut of 125-150bp (75bp w.e.f1 January 2009), as the banks have reaped the benefit of the cut in CRR (350bp in3QFY09) and have demonstrated their pricing power to corporates. In 3QFY09, 10yearG-Sec has come off by 320bp on the back of falling inflation and host of RBI action,which will help the banks to report strong trading profits and higher MTM reversal ofinvestment depreciation. However, some of the MTM reversal may be offset bydepreciation on the equity portfolio. Further in terms of asset quality, recent RBI guidelineswill help the banks to postpone the recognition of NPAs in their books. However, mostbanks are likely to make higher NPA provisions due to the strong profitability during thequarter.EXPECTED QUARTERLY PERFORMANCE SUMMARYRECO NET INTEREST OPERATING PROFIT NET PROFIT(RS MILLION)DEC.08 CHG. (%) DEC.08 CHG. (%) DEC.08 CHG. (%)BanksAndhra Bank Buy 4,146 18.5 3,025 4.9 2,008 26.3Axis Bank Buy 9,619 28.7 7,882 17.2 4,047 31.9Bank of Baroda Buy 13,114 31.5 10,591 13.6 5,616 12.1Bank of India Buy 14,048 30.1 13,198 35.9 7,197 40.6Canara Bank Buy 11,690 25.1 9,440 24.6 5,908 28.8Corporation Bank Buy 4,154 24.5 3,879 39.8 2,327 21.9Federal Bank Buy 3,290 61.5 3,140 87.3 1,359 32.0HDFC Buy 9,082 8.8 8,142 6.5 5,995 7.9HDFC Bank Buy 19,722 37.2 13,344 25.1 6,150 43.2ICICI Bank Buy 20,659 5.4 23,424 3.7 9,934 -19.3Indian Bank Buy 6,878 22.4 6,128 32.3 3,742 21.7Indian Overseas Bank Buy 8,128 23.9 7,703 56.2 3,782 22.7J&K Bank Buy 2,721 35.2 2,196 30.8 1,330 21.9Karnataka Bank Buy 1,454 25.6 1,387 14.1 807 16.9Oriental Bank Neutral 5,027 25.0 4,732 59.5 2,719 36.1Punjab National Bank Buy 17,548 23.2 12,378 24.9 6,953 28.5State Bank Buy 56,055 31.7 44,559 21.8 24,292 34.3Union Bank Buy 9,778 30.0 8,178 28.5 5,263 44.2Sector Aggregate 217,114 25.9 183,324 22.3 99,428 21.9Ajinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) + 91 22 3982 5426/Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 541531 December 200863

Banking22% YoY growth in deposits; 26% YoY growth in loansBusiness growth continues to remain strong for the sector. In 3QFY09, deposits grew~22% YoY and 3.2% QoQ (as on 5 December 2008) to Rs35,549b and loans grew ~26%YoY and 3.9% QoQ during 3QFY09 (as on 5 December 2008) to Rs26,421b. Creditdemand is driven by the corporate sector as retail loans growth (including mortgages) ismuted due to: (a) declining underlying demand and (b) risk aversion by lenders.We expect demand for corporate credit to slow down in FY10 on the back of the slowdownin industrial production, lower working capital requirement driven by sharp fall in rawmaterial prices, and postponement of planned capex. Replacement of foreign credit byINR credit can however create growth for Indian banks if global debt markets remainweak. We expect ~18% YoY growth in credit in FY10 v/s ~23% in FY09.Net interest margin - no major pressureIn 3QFY09, most banks reduced their PLR by 125-150bp (75bp w.e.f 1 January 2009)taking a cue from the cut in benchmark rates by the RBI. Banks have also reduceddeposit rates by 125-150bp (50-75bp w.e.f 1 January 2009) across maturities. Loan repricingwill occur with immediate effect, while deposit repricing will occur with a lag effect.However, banks have demonstrated their pricing power with large corporates and havecurtailed sub-PLR loans. This coupled with the sharp CRR cut of 350bp has increasedearnings assets for banks and would offset the PLR cut impact. We do not expect marginpressure for banks in 3QFY09.Asset quality not to weaken significantly in near futureWhile NPAs in absolute amounts are expected to rise, asset quality would not weakensignificantly in FY09. In 2QFY09, gross NPAs of the banks grew 11% QoQ and webelieve this increasing trend will continue in 3QFY09 as well. We expect early signs ofrising delinquencies are to be witnessed in export related industries, SMEs and unsecuredretail credit. Banks have turned cautious owing to the potential of rising NPAs goingforward.However, recent measures by the RBI: (1) to exempt specific infrastructure projects frombeing classified as NPAs (due to technical reasons); (2) allowing one-time restructuring ofreal estate loans, and (3) allowing second time restructuring of loans given to other sectors,would lead to the delay in NPA recognition by a couple of quarters.31 December 200864

BankingWE HAVE ASSUMED HIGHER GROSS NPAS GOING FORWARD (YOY GROWTH %)STATE OWNED BANKS SEP-06 MAR-07 SEP-07 MAR-08 JUN-08 SEP-08 FY09E FY10ESBI (Standalone) -17.8 3.8 3.2 36.0 0.2 18.1 36.2 64.3Canara Bank -23.3 -16.7 -10.0 -5.2 -1.9 -0.8 38.3 83.2PNB -8.0 8.1 52.6 -2.1 -12.0 -33.8 14.2 67.3Bank of India -21.0 -15.3 -11.5 -8.1 -0.5 0.7 27.8 116.0Bank of Baroda -23.1 -12.5 -14.4 -5.3 -5.3 -8.2 26.5 92.8Union Bank 0.6 -10.7 -17.7 -11.5 -10.9 0.9 8.8 80.1IOB -14.3 -8.7 -11.7 -11.0 -3.3 60.2 32.7 98.1OBC -22.5 -31.3 -24.9 -12.0 -18.0 -15.2 11.0 34.0Indian Bank -14.6 -18.4 -17.5 -10.8 -23.1 -8.8 43.5 122.1Private BanksICICI Bank -8.4 63.7 80.7 72.2 53.6 53.6 69.4 40.5HDFC Bank NA NA 24.5 37.9 111.6 118.1 60.3 87.8Axis Bank 1.9 10.8 11.0 18.1 32.1 45.8 201.2 97.6Source: Company/MOSLExpect 22% YoY growth in operating profitsWe expect banks to report strong performance in 3QFY09 with operating profits growingby ~22% YoY and 8% QoQ on the back of improved margins, strong loan growth, strongfee-based income, and higher trading profits. Operating expenses are expected to increasefor state-owned banks due to likely wage increases and other operating expenses due tothe rapid branch rollout. We have assumed 15% growth in average wage cost across allstate-owned banks.Strong MTM provisions reversal will ensure even higher PAT growthWe expect strong net profit numbers across all banks (except ICICI Bank) on the back ofstrong operating profits and substantial reversal of MTM provisions in 3QFY09. During1HFY09, banks had taken a heavy MTM hit on their investment portfolio due to 75-125bpincrease in yields on G-secs across all maturities. However, in 3QFY09, yields on 10-yearG-secs have fallen by ~320bp to 5.4% whereas 1-year and 2-year G-secs have fallen by~375bp each to 5.1% and 5.0% respectively. We expect MTM provision reversal andhigher trading profits across all banks. SBI, BoB, OBC, Canara, Indian, Union and IoBare likely to be the biggest beneficiaries.BANKS CAN REVERSE MTM PROVISION DUE TO FALL IN YIELD OF GSEC SECURITIES QOQ (RS B)AS ON 1HFY 09OVERALL G-SEC OVERALL INVESTMENT G-SEC INTO AFSBanks with higher AFS G Secportfolio to have higherMTM reversal of provisions31 December 2008BOOK INVST.* BOOK AFS (%) AFS (%) DURATION (YRS)SBI 2,000 1,650 40.0 25.0 2.5BoI 376 340 14.0 4.6 2.0BoB 405 339 35.0 22.0 1.8PNB 582 501 23.0 11.0 1.5Union Bank 347 291 33.3 20.6 2.2Indian Bank 199 175 33.3 33.9 3.3IOB 279 251 25.0 17.0 2.0OBC 257 226 34.0 24.0 1.8Note: Calculated numbersSource: Company65

BankingTop picksThe valuations of state owned banks are at 0.6x-1.3x FY09E BV, with RoEs in the rangeof 15-26%. We prefer selective buying and like banks having strong core deposits franchise,higher Tier I capital and high provision coverage ratio. We continue to maintain HDFCBank as our top pick among the private banks, and SBI, BoB, PNB, Canara Bank andIndian Bank among the state-owned banks.READY RECKONER (%) - KEY INDICATORS31 December 2008SBI PNB BOB BOI UNION INDIAN ICICI AXIS HDFC HDFCBANK BANK BANK BANK BANK*Loan GrowthFY 08 23.5 23.7 27.6 33.6 19.2 37.1 15.2 61.8 38.0 29.2FY 09 25.0 24.0 23.0 24.0 27.0 27.0 3.6 36.0 37.0 20.0FY 10 18.0 18.0 18.0 18.0 21.0 22.0 6.9 28.0 22.0 20.0Deposits GrowthFY 08 23.4 19.0 21.7 25.1 21.9 29.6 6.0 49.1 48.0 20.9FY 09 22.0 21.0 21.0 21.0 25.0 15.0 -7.0 30.0 20.0 20.5FY 10 17.0 17.0 17.0 15.5 21.0 17.0 9.0 28.0 20.0 17.2Gross NPAFY 08 3.0 2.7 1.8 1.7 2.2 1.2 3.3 0.7 1.7 0.8FY 09 3.3 2.5 1.9 1.7 1.9 1.4 5.3 1.8 2.0 0.7FY 10 4.6 3.7 3.0 3.2 2.8 2.5 6.9 2.8 3.1 0.7Net NPAFY 08 1.8 0.6 0.5 0.4 0.2 0.2 1.5 0.4 0.5 0.2FY 09 1.9 0.4 0.5 0.3 0.1 0.2 2.3 0.9 0.7 0.1FY 10 2.7 1.1 1.1 1.1 0.9 0.8 2.5 1.3 1.1 0.1Slippage RatioFY 08 2.3 2.0 1.2 1.6 1.2 1.5 1.9 1.0 2.6 N.A.FY 09 2.5 2.2 1.5 1.8 1.5 1.7 2.5 2.5 2.5 N.A.FY 10 3.5 3.0 3.0 3.0 3.0 3.0 2.5 3.0 3.0 N.A.Provision Coverage RatioFY 08 51.2 77.3 75.1 78.7 92.3 80.0 53.9 50.0 68.5 77.8FY 09 53.7 84.3 72.0 81.7 97.0 85.0 58.0 52.0 65.0 80.8FY 10 50.7 70.3 65.0 65.4 70.0 70.0 65.0 54.0 64.0 84.6Credit CostFY 08 0.8 0.5 0.8 1.0 1.1 1.5 1.4 1.3 2.5 0.1FY 09 1.0 0.9 0.7 1.0 0.8 1.3 1.8 1.6 1.9 0.1FY 10 1.4 1.2 1.1 1.5 1.2 1.6 2.0 1.8 2.1 0.1Capital Adequacy RatioFY 08 13.5 13.5 12.9 12.0 12.5 12.9 14.0 13.7 13.5 16.5FY 09 11.7 11.5 12.3 11.7 11.5 11.7 14.9 10.3 10.7 14.0FY 10 11.1 10.5 11.0 11.3 10.7 11.4 14.1 9.4 9.9 12.5Tier I Capital RatioFY 08 9.1 9.0 7.6 7.7 7.5 11.4 11.8 10.2 10.6 NMFY 09 8.1 8.5 7.5 8.0 7.1 10.2 11.5 7.6 8.3 NMFY 10 7.7 8.2 7.0 8.0 6.8 9.9 10.8 6.8 7.6 NMYield on LoansFY 08 9.3 9.7 8.8 8.8 9.8 10.2 10.7 9.8 12.6 10.9FY 09 10.0 10.5 9.3 9.3 10.3 11.4 10.1 10.5 12.8 11.6FY 10 9.6 10.2 9.1 9.1 10.0 11.0 9.8 10.2 12.5 11.4Cost of DepositsFY 08 5.6 5.4 5.3 5.3 6.1 5.5 7.2 5.1 5.6 8.1FY 09 6.0 6.2 5.6 5.6 6.2 6.2 7.1 6.0 5.8 9.2FY 10 5.9 6.1 5.6 5.6 6.0 6.2 7.0 6.0 5.7 8.8Net Interest MarginsFY 08 3.0 3.4 2.7 2.9 2.9 3.5 2.1 3.1 5.0 3.4FY 09 3.1 3.4 2.8 3.1 3.1 3.9 2.3 3.3 5.0 3.4FY 10 3.0 3.3 2.7 3.0 2.9 3.8 2.6 3.2 5.1 3.5Note: FY09 and FY10 MOSL est; Slippage Ratio = Additions to GNPA/Opening loans; Credit cost = Provisions on loans/Opening loans;* HDFC Bank proforma merged figure for FY0866

BankingDEPOSITS GROWTH STRONG AT 22% YOYCREDIT GROWTH STRONG AT 26% YOY383226201423Deposits (Rs t) LHS2524 24Chg YoY (%) RHS 322222 202422168028231813828NFC (Rs t) LHS252223Chg YoY (%) RHS2725223632282624204QFY071QFY082QFY083QFY084QFY081QFY092QFY095th Dec4QFY071QFY082QFY083QFY084QFY081QFY092QFY095th DecSource: RBI/MOSLCREDIT TO DEPOSITS RATIO AT ~73%Strong loan growth backedby increased demand fromIndian corporatesdue to drying up of othersources of finance leading tohigher C-D ratio75.574.072.571.069.568.074.171.170.772.173.6 73.673.974.34QFY071QFY082QFY083QFY084QFY081QFY092QFY095th DecSource: Company/MOSLINFLATION MODERATING AT A RAPID PACE - WPI INDEX FELL SHARPLY IN LAST FOUR MONTHS13.4Inflation (%) - (LHS)WPI - Index (RHS)260Falling inflation givingroom for the expansionarymonetary policy10.78.05.3Reported inflation nos expected to fallfaster with higher base2402202002.6180May-06Jul-06Sep-06Nov-06Jan-07Mar-07Apr-07Jun-07Aug-07Oct-07Dec-07Feb-08Mar-08May-08Jul-08Sep-08Nov-08Source: RBI/MOSL31 December 200867

BankingCRR CUT BY 350BP IN 3QFY09 - INFUSED RS1.4T IN THE SYSTEM...... LED TO COMFORTABLE LIQUIDITY SITUATION10.08.06.04.04.8Nov 024.5June 035.3Dec 066.5Apr 077.0Aug 078.3May 089.0Aug 086.5Oct 086.0Oct 085.5Nov 081,0005000-500-1,000Apr-08Apr-08May-08Jun-08Net Repo (Rs B)In Dec 2008 RBI on an avg. dailybasis absorbed ~Rs280bIn Oct 2008 RBI on and avg.daily basis infused ~Rs370bJul-08Jul-08Aug-08Sep-08Oct-08Nov-08Nov-08Dec-08REPO RATES DOWN 250BP IN 3QFY09REVERSE REPO RATES DOWN 100BP IN 3QFY099.308.808.307.807.306.806.307.06.06.87.89.08.07.56.56.506.005.505.004.505.505.004.505.005.505.756.005.005.80Mar 03Mar 04Jun 06Mar 07July 08Oct 08Nov 08Dec 084.00Feb 03Aug 03Mar 04Apr 05Jan 06Jun 06Jul 06Dec 08Source: RBI/MOSLSBI CUTS PLR (%) BY 150BP IN 3QFY09...14.0013.75Monetary actions leading tofall in interest rate13.0012.0011.5012.2512.7512.5012.2512.7513.0012.2511.0010.7511.0010.00Apr-06Aug-06Dec-06Feb-07Apr-07Feb-08Feb-08Jun-08Aug-08Nov-08Jan-09Source: Company/MOSL31 December 200868

Banking...AND DEPOSITS RATE (%) BY 50-150BP ACROSS VARIOUS MATURITIESMAY AUG DEC JAN AUG NOV DEC JAN JUN JUN AUG OCT DEC JAN2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2008 2008 20097days-14days 3.00 3.50 3.75 - - - - - - -15days-45days 4.50 4.75 5.00 5.00 5.00 5.00 4.75 4.75 4.75 4.75 4.75 4.75 4.75 4.2546days-90days - - - - - - - 5.25 5.25 5.25 5.25 5.25 5.25 5.2591days-180days - - - - - - - 7.00 7.00 7.00 7.50 7.50 7.00 6.5046days-179days 5.00 5.25 5.50 5.50 5.50 5.50 5.25 - - - -179days-270days - - - - 5.50 5.50 5.25 - - - -271days-less than 1year - - - - 6.75 6.75 6.50 - - - -180days-less than 1year 6.00 6.25 6.50 6.50 - - - 7.50 7.50 8.00 8.50 8.50 8.00 7.251year-549days - - - - - 8.00 8.25 - - - -550days - - - - - 8.75 8.50 - - - -551days to less than 2years - - - - - 8.00 8.25 - - - -1year to less than 2years - - - - 8.00 - - 8.75 8.75 9.50 10.00 10.00 9.50 8.501000 days deposit scheme 10.50 10.00 9.002years to less than 3years - - - - 8.25 8.25 8.25 8.50 8.75 9.50 9.50 9.50 9.00 8.751year to less than 3years 6.25 6.75 7.50 8.25 - - - - - - -3years to less than 5years 6.50 7.00 7.75 8.25 8.50 8.50 8.50 8.50 8.85 9.00 9.75 9.75 9.25 8.505years and above 7.00 7.25 8.00 8.25 8.50 8.50 8.50 8.50 9.00 9.00 9.25 9.25 9.00 8.50Source: CompanyBOND YIELDS FELL SHARPLY DURING THE QUARTER - WILL HELP BANKS TO REPORT HIGHER TRADING PROFITS AND MTM PROVISIONS REVERSAL1-YEAR G-SEC YIELD FELL BY ~375BP TO 5.1% 10-YEAR G-SEC YIELD FELL BY ~320BP TO 5.4%10.009.008.007.007.47.99.59.17.110.009.008.007.007.88.29.48.67.66.005.00Jan-08Jan-08Feb-08Mar-08Apr-08May-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Oct-085.5Nov-08Dec-086.005.00Jan-08Jan-08Feb-08Mar-08Apr-08May-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Oct-08Nov-085.5Dec-08Source: Company/MOSL31 December 200869

BankingStock performance and valuationsSTOCK PERFORMANCE (%)ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARBankingAndhra Bank 0 -48 25 5 16 -4Axis Bank -30 -48 -5 5 -14 -4Bank of Baroda -6 -39 19 13 10 5Bank of India 2 -21 27 31 17 23Canara Bank -1 -43 24 9 15 1Corporation Bank -31 -56 -6 -4 -15 -12Federal Bank -21 -52 4 1 -5 -8HDFC -31 -48 -6 4 -15 -4HDFC Bank -19 -42 6 10 -3 2ICICI Bank -16 -64 9 -11 -1 -20Indian Bank 6 -30 31 23 21 14Indian Overseas Bank -22 -60 3 -7 -6 -16J&K Bank -21 -59 4 -6 -5 -14Karnataka Bank -33 -65 -8 -12 -18 -20Oriental Bank of Commerce 4 -45 29 8 19 -1Punjab National Bank 11 -21 36 32 26 23State Bank -12 -42 13 10 3 2Union Bank 14 -21 39 31 29 23RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)105SensexMOSL Banking Index105MOSL Banking IndexSensex907560Sep-08 Oct-08 Nov-08 Dec-0890756045Dec-07 Mar-08 Jun-08 Sep-08 Dec-08CMP (RS) RECO EPS (RS) P/E (X) P/BV (X) ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EBanksAndhra Bank 55 Buy 11.9 13.2 14.4 4.6 4.2 3.8 0.8 0.7 0.7 18.0 18.6 18.0Axis Bank 505 Buy 29.9 43.6 49.2 16.9 11.6 10.3 2.1 1.8 1.6 17.6 16.6 16.5Bank of Baroda 280 Buy 39.3 50.5 57.2 7.1 5.6 4.9 1.0 0.9 0.8 14.7 16.5 16.4Bank of India 288 Buy 38.2 53.3 51.3 7.5 5.4 5.6 1.7 1.3 1.1 27.6 27.9 21.8Canara Bank 188 Buy 38.2 47.5 51.6 4.9 4.0 3.6 0.9 0.8 0.7 19.1 21.5 20.0Corporation Bank 189 Buy 51.2 58.0 60.9 3.7 3.3 3.1 0.6 0.6 0.5 18.4 18.3 16.8Federal Bank 162 Buy 21.5 27.5 33.7 7.5 5.9 4.8 0.7 0.6 0.6 13.6 11.5 12.9HDFC 1,488 Buy 68.4 78.8 95.1 21.7 18.9 15.6 3.5 3.1 2.8 22.2 17.7 18.9HDFC Bank 998 Buy 41.0 53.3 67.4 24.3 18.7 14.8 3.1 2.9 2.5 12.6 15.2 16.7ICICI Bank 448 Buy 37.4 32.8 42.2 12.0 13.7 10.6 1.1 1.0 1.0 11.7 7.7 9.3Indian Bank 137 Buy 23.5 27.9 28.6 5.8 4.9 4.8 1.3 1.1 0.9 25.8 23.8 20.7Indian Overseas Bank 72 Buy 22.0 24.0 25.4 3.3 3.0 2.8 0.8 0.7 0.6 27.8 24.8 21.9J&K Bank 355 Buy 74.2 99.8 117.2 4.8 3.6 3.0 0.7 0.6 0.5 16.7 19.4 19.5Karnataka Bank 79 Buy 19.9 21.5 23.1 4.0 3.7 3.4 0.7 0.6 0.5 18.5 17.7 16.8Oriental Bank 154 Neutral 33.6 39.5 43.9 4.6 3.9 3.5 0.7 0.6 0.5 14.8 16.0 15.6Punjab National Bank 526 Buy 65.0 79.4 88.0 8.1 6.6 6.0 1.5 1.3 1.1 19.6 21.3 20.2State Bank 1,288 Buy 106.6 137.7 153.8 12.1 9.4 8.4 1.7 1.5 1.3 16.8 16.6 16.4Union Bank 163 Buy 27.5 33.1 33.9 5.9 4.9 4.8 1.5 1.2 1.0 26.8 26.6 22.4Sector Aggregate 10.9 9.0 8.0 1.9 1.5 1.3 17.1 16.2 16.231 December 200870

Results PreviewSECTOR: BANKINGAndhra BankSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGANDB INREUTERS CODEADBK.BO31 December 2008Previous Recommendation: BuyBuyRs55Equity Shares (m) 485.052-Week Range 130/351,6,12 Rel.Perf.(%) -6/29/5M.Cap. (Rs b) 26.7M.Cap. (US$ b) 0.5YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO3/07A 18,644 5,379 11.1 10.5 5.0 0.8 11.3 17.8 1.2 0.93/08A 20,012 5,756 11.9 7.0 4.6 0.8 11.7 18.0 1.1 0.83/09E 22,995 6,424 13.2 11.6 4.2 0.7 11.0 18.6 1.0 0.73/10E 26,123 6,973 14.4 8.5 3.8 0.7 10.8 18.0 1.0 0.7? We expect net interest income (NII) to grow 19% YoY to Rs4.1b on the back of 28% YoY growth in loans. Adjustedfor exceptional interest income (Rs0.6b) on the farm loan waiver package, accounted for in 2QFY09, we expect NIIto grow 11% QoQ.? We expect fee income growth to be subdued at ~15% on a higher base. Also during 3QFY08, Andhra Bank had largetrading profits of Rs366m and we expect the same to be Rs250m during 3QFY09, which would make overall otherincome growth subdued.? With gross NPAs at just 1.03% and net NPAs at 0.24%, incremental provisioning for NPA would be low.? In 1HFY09, the bank made provision on investment of Rs1b and with the fall in yields, we expect the bank to reversethese provisions on the investment portfolio.? The stock is trading at 4.2x FY09E EPS and 0.7x FY09E BV. The stock also offers an attractive dividend yield of7%. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEInterest Income 9,704 10,455 10,654 11,489 11,574 13,281 13,446 14,151 42,096 52,452Interest Expense 6,273 7,008 7,156 8,263 8,111 8,948 9,300 9,800 28,700 36,159Net Interest Income 3,431 3,447 3,498 3,226 3,463 4,333 4,146 4,350 13,396 16,293% Change (Y-o-Y) 0.9 25.7 18.5 34.9 -0.3 21.6Other Income 1,315 1,379 1,680 2,036 1,187 1,354 1,797 2,365 6,617 6,703Net Income 4,746 4,826 5,178 5,262 4,649 5,687 5,944 6,715 20,012 22,995Operating Expenses 2,512 2,505 2,295 2,131 2,597 2,905 2,919 2,708 9,443 11,128Operating Profit 2,234 2,322 2,883 3,131 2,053 2,782 3,025 4,007 10,569 11,867% Change (Y-o-Y) 18.2 13.6 19.1 5.9 -8.1 19.8 4.9 28.0 13.5 12.3Other Provisions 93 110 278 914 1,227 569 50 505 1,394 2,350Profit before Tax 2,141 2,212 2,605 2,218 826 2,213 2,975 3,503 9,176 9,517Tax Provisions 730 700 1,015 975 50 600 967 1,476 3,420 3,093Net Profit 1,411 1,512 1,590 1,243 776 1,613 2,008 2,027 5,756 6,424% Change (Y-o-Y) 21.2 3.3 16.7 -10.5 -45.0 6.7 26.3 63.1 7.0 11.6Interest Exp./Interest Income (%) 64.6 67.0 67.2 71.9 70.1 67.4 69.2 69.3 68.2 68.9Other Income/Net Income (%) 27.7 28.6 32.4 38.7 25.5 23.8 30.2 35.2 33.1 29.1Cost to Income Ratio (%) 52.9 51.9 44.3 40.5 55.8 51.1 49.1 40.3 47.2 48.4Provisions/Operating Profits (%) 4.2 4.7 9.6 29.2 59.8 20.4 1.7 12.6 13.2 19.8Tax Rate (%) 34.1 31.6 39.0 44.0 6.1 27.1 32.5 42.1 37.3 32.5E: MOSL EstimatesAjinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) + 91 22 3982 5426/Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 541531 December 200871

Results PreviewSECTOR: BANKINGAxis BankSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGAXSB INREUTERS CODEAXBK.BO31 December 2008Previous Recommendation: BuyBuyRs505Equity Shares (m) 357.752-Week Range 1,291/3631,6,12 Rel.Perf.(%) 18/12/5M.Cap. (Rs b) 180.5M.Cap. (US$ b) 3.7YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO3/07A 24,784 6,590 23.4 34.5 21.6 4.2 11.6 21.0 1.1 4.33/08A 43,808 10,710 29.9 28.0 16.9 2.1 13.7 17.6 1.2 2.13/09E 63,304 15,590 43.6 45.6 11.6 1.8 10.3 16.6 1.2 1.93/10E 77,554 17,608 49.2 12.9 10.3 1.6 9.4 16.5 1.1 1.7? We expect NII growth of ~29% YoY in 3QFY09 on the back of 50%+ loan growth and improved yield on advances.3QFY08 NII is a large base due to capital raising impact during that quarter.? We expect margins to decline QoQ from 3.5% in 2QFY09 as we expect cost of funds to rise faster than yields during3QFY09.? Another key driver has been sustained growth in its fee-based income. We expect core fee income to grow ~50% in3QFY09.? Despite increased provisions for NPAs, we believe MTM gains on investment book would lead to lower overallprovisions.? The stock currently trades at 11.6x FY09E EPS and 1.8x FY08E BV. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEInterest Income 15,111 16,765 18,023 20,154 22,664 25,450 27,794 30,309 70,053 106,217Interest Expense 10,901 10,878 10,550 11,870 14,560 16,316 18,174 20,099 44,200 69,149Net Interest Income 4,209 5,887 7,473 8,284 8,105 9,134 9,619 10,210 25,854 37,068Y-o-Y Growth (%) 41.3 72.9 91.1 88.7 92.5 55.2 28.7 23.2 76.1 43.4Other Income 3,682 3,829 4,879 5,565 6,248 6,944 6,226 6,818 17,955 26,236Net Income 7,892 9,716 12,352 13,849 14,353 16,078 15,846 17,027 43,808 63,304Operating Expenses 4,212 5,087 5,630 6,621 6,329 7,334 7,964 8,701 21,549 30,328Operating Profit 3,679 4,629 6,723 7,228 8,023 8,744 7,882 8,326 22,259 32,975Y-o-Y Growth (%) 29.9 85.3 101.4 82.1 118.1 88.9 17.2 15.2 76.1 48.1Provision & Contingencies 1,009 1,145 2,001 1,642 2,967 2,558 1,750 2,079 5,794 9,354Profit before Tax 2,670 3,484 4,722 5,586 5,056 6,186 6,132 6,247 16,465 23,621Tax Provisions 921 1,206 1,654 1,972 1,754 2,157 2,085 2,034 5,755 8,031Net Profit 1,750 2,278 3,068 3,614 3,302 4,029 4,047 4,213 10,710 15,590Y-o-Y Growth (%) 45.2 60.5 66.2 70.5 88.7 76.8 31.9 16.6 62.5 45.6Int Exp/ Int Earned (%) 72.1 64.9 58.5 58.9 64.2 64.1 65.4 66.3 63.1 65.1Other Income / Net Income (%) 46.7 39.4 39.5 40.2 43.5 43.2 39.3 40.0 41.0 41.4Cost to Income Ratio (%) 53.4 52.4 45.6 47.8 44.1 45.6 50.3 51.1 49.2 47.9Provisions/Operating Profit (%) 27.4 24.7 29.8 22.7 37.0 29.3 22.2 25.0 26.0 28.4Tax Rate (%) 34.5 34.6 35.0 35.3 34.7 34.9 34.0 32.6 35.0 34.0E: MOSL EstimatesAjinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) + 91 22 3982 5426/Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 541531 December 200872

Results PreviewSECTOR: BANKINGBank of BarodaSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGBOB INREUTERS CODEBOB.BO31 December 2008Previous Recommendation: BuyBuyRs280Equity Shares (m) 365.552-Week Range 501/1881,6,12 Rel.Perf.(%) 3/66/13M.Cap. (Rs b) 102.5M.Cap. (US$ b) 2.1YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO3/07A 49,593 10,265 28.1 24.1 10.0 1.2 11.8 12.4 0.8 1.33/08A 59,628 14,355 39.3 39.8 7.1 1.0 12.9 15.6 0.9 1.13/09E 69,780 18,459 50.5 28.6 5.6 0.9 12.3 17.6 0.9 1.03/10E 80,802 20,916 57.2 13.3 4.9 0.8 11.0 17.4 0.9 0.9? We expect NII to grow 32% YoY to Rs13.1b on the back of strong growth in loans and stable margins QoQ(adjusted). Adjusted for the loss on redemption of AFS security of Rs1.2b in 2QFY09 (booked through NII line), weexpect the NII to grow 5% QoQ.? We expect core fees to grow 30% YoY. However, higher equity trading profits of Rs1.94b and recoveries of Rs1.3bin 3QFY08 are likely to decline YoY, putting pressure on overall other income growth.? We expect the bank to reverse Rs2.5b of MTM provisions and accelerate NPA provision during the quarter.? We expect earnings growth of 12% YoY and 35% QoQ on the back of robust core operating performance and lowerprovisions.? The stock trades at 0.8x FY10E BV and 4.9x FY10E EPS. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEInterest Income 26,006 28,798 30,022 33,311 32,938 35,510 38,676 41,413 118,135 148,537Interest Expense 16,961 18,983 20,047 23,026 22,368 24,172 25,562 27,556 79,017 99,658Net Interest Income 9,046 9,814 9,975 10,285 10,570 11,338 13,114 13,857 39,118 48,879% Change (YoY) 16.3 17.1 9.8 -2.4 16.9 15.5 31.5 34.7 9.3 25.0Other Income 4,242 4,541 6,180 5,546 5,126 4,759 5,327 5,689 20,510 20,901Net Income 13,287 14,355 16,155 15,831 15,696 16,097 18,441 19,546 59,628 69,780Operating Expenses 6,843 7,983 6,831 7,687 7,094 7,641 7,850 8,551 29,343 31,135Operating Profit 6,445 6,372 9,324 8,145 8,602 8,456 10,591 10,996 30,286 38,645% Change (YoY) 25.9 23.7 30.1 5.4 33.5 32.7 13.6 35.0 25.4 27.6Provision & Contingencies 1,414 981 1,570 4,250 2,803 2,419 1,950 3,921 8,214 11,094Profit before Tax 5,030 5,392 7,754 3,895 5,799 6,037 8,641 7,075 22,072 27,551Tax Provisions 1,722 2,120 2,744 1,131 2,090 2,084 3,024 1,893 7,716 9,092Net Profit 3,308 3,272 5,010 2,764 3,709 3,953 5,616 5,181 14,355 18,459% Change (YoY) 102.6 13.5 52.2 12.5 12.1 20.8 12.1 87.4 39.8 28.6Int Exp/ Int Earned (%) 65.2 65.9 66.8 69.1 67.9 68.1 66.1 66.5 66.9 67.1Other Income / Net Income (%) 31.9 31.6 38.3 35.0 32.7 29.6 28.9 29.1 34.4 30.0Cost to Income Ratio (%) 51.5 55.6 42.3 48.6 45.2 47.5 42.6 43.7 49.2 44.6Provisions/Operating Profit (%) 21.9 15.4 16.8 52.2 32.6 28.6 18.4 35.7 27.1 28.7Tax Rate (%) 34.2 39.3 35.4 29.0 36.0 34.5 35.0 26.8 35.0 33.0E: MOSL EstimatesAjinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) + 91 22 3982 5426/Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 541531 December 200873

Results PreviewSECTOR: BANKINGBank of IndiaSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGBOI INREUTERS CODEBOI.BO31 December 2008Previous Recommendation: BuyBuyRs288Equity Shares (m) 525.952-Week Range 466/1891,6,12 Rel.Perf.(%) 9/61/31M.Cap. (Rs b) 151.3M.Cap. (US$ b) 3.1YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO3/07A 50,034 11,232 23.0 60.2 12.5 2.4 11.8 21.2 0.9 2.63/08A 63,461 20,094 38.2 66.1 7.5 1.7 12.0 27.6 1.3 1.83/09E 80,958 28,017 53.3 39.4 5.4 1.3 11.7 27.9 1.4 1.43/10E 91,944 26,979 51.3 -3.7 5.6 1.1 11.3 21.8 1.2 1.2? We expect strong loan growth of 30%+ and deposit growth of 30%+. This strong growth is partly on account of thelower base.? We expect margins to remain stable. BoI’s cost of funds remains one of the best in the industry due to the strong retailterm deposit franchise despite falling CASA.? We expect the strong traction in fee-based income to continue in 3QFY09. In 2QFY09, fee-based income grew 58%YoY. We have assumed trading profits of Rs900m in 3QFY09 v/s Rs180m in 2QFY09 and Rs1.2b in 3QFY08.? The bank continues to be the most consistent in terms of improvement in core performance. We believe BoI hasmany levers to ring in positive surprises versus our earnings estimate. The stock is trading at 5.4x FY09E EPS and1.3x FY10E BV. We maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEInterest Income 27,273 29,752 31,511 35,016 35,483 39,628 41,630 43,448 123,552 160,190Interest Expense 17,801 19,895 20,717 22,848 23,676 25,996 27,583 28,877 81,260 106,132Net Interest Income 9,472 9,858 10,795 12,168 11,808 13,631 14,048 14,572 42,292 54,058Y-o-Y Growth (%) 23.9 16.1 25.7 25.7 24.7 38.3 30.1 19.8 22.9 27.8Other Income 3,812 5,284 5,541 6,532 5,664 6,495 7,000 7,741 21,169 26,900Net Income 13,284 15,142 16,336 18,700 17,472 20,126 21,048 22,312 63,461 80,958Operating Expenses 6,506 6,744 6,622 6,579 6,748 7,979 7,850 7,672 26,450 30,248Operating Profit 6,778 8,398 9,714 12,122 10,724 12,147 13,198 14,640 37,012 50,710Y-o-Y Growth (%) 45.0 75.3 75.6 35.4 58.2 44.6 35.9 20.8 54.5 37.0Provision & Contingencies 1,992 2,993 2,314 2,866 3,490 2,868 2,575 3,916 10,165 12,849Profit before tax 4,786 5,405 7,400 9,256 7,234 9,280 10,623 10,724 26,847 37,861Tax Provisions 1,634 1,153 2,281 1,686 1,615 1,651 3,426 3,152 6,753 9,844Net Profit 3,152 4,253 5,119 7,570 5,620 7,629 7,197 7,572 20,094 28,017Y-o-Y Growth (%) 51.0 100.5 100.8 69.2 78.3 79.4 40.6 0.0 78.9 39.4Int Exp/ Int Earned (%) 65.3 66.9 65.7 65.3 66.7 65.6 66.3 66.5 65.8 66.3Other Income / Net Income (%) 28.7 34.9 33.9 34.9 32.4 32.3 33.3 34.7 33.4 33.2Cost to Income Ratio (%) 49.0 44.5 40.5 35.2 38.6 39.6 37.3 34.4 41.7 37.4Provisions/Operating Profit (%) 29.4 35.6 23.8 23.6 32.5 23.6 19.5 26.7 27.5 25.3Tax Rate (%) 34.1 21.3 30.8 18.2 22.3 17.8 32.3 29.4 25.2 26.0E: MOSL EstimatesAjinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) + 91 22 3982 5426/Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 541531 December 200874

Results PreviewSECTOR: BANKINGCanara BankSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGCBK INREUTERS CODECNBK.BO31 December 2008Previous Recommendation: NeutralBuyRs188Equity Shares (m) 410.052-Week Range 421/1351,6, 12 Rel.Perf.(%) 5/34/9M.Cap. (Rs b) 77.0M.Cap. (US$ b) 1.6YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO3/07A 54,778 14,208 34.7 5.8 5.4 0.9 13.5 18.8 1.0 1.03/08A 57,507 15,650 38.2 10.1 4.9 0.9 13.3 19.1 0.9 1.03/09E 67,236 19,456 47.5 24.3 4.0 0.8 12.4 21.5 1.0 0.93/10E 78,512 21,157 51.6 8.7 3.6 0.7 11.8 20.0 1.0 0.8? We expect loans to grow by 28% YoY and deposits to grow 24% YoY. Lower base effect is likely to keep loan growthstrong.? We expect NII to grow 25% YoY due to the lower base effect. In 3QFY08, NII degrew 10% YoY.? We expect the operating profit to grow 25% YoY on the back of strong growth in NII and higher trading profits.? We expect significant reversal in MTM provisions for Canara Bank. The bank holds ~25% of investment book in theAFS category with the duration 1.5years (as of 1HFY09).? The stock is trading at 4x FY09E EPS and 0.8x FY09E BV. Margin improvement, growing fee-based income andfalling interest rate (higher proportion of bulk deposits (25%) and large AFS portfolio (~Rs100b) would help the bankreport strong numbers going forward. We expect the return ratio for the bank to remain strong with RoA of 1% andRoE of 20%+ over FY09-10. We upgrade the stock from Neutral to Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEInterest Income 33,800 34,826 35,502 37,880 37,305 41,092 43,491 45,483 142,007 167,371Interest Expense 24,859 26,957 26,158 28,655 27,114 29,602 31,800 33,263 106,629 121,779Net Interest Income 8,941 7,869 9,344 9,225 10,192 11,490 11,690 12,220 35,378 45,592% Change (Y-o-Y) -5.7 -19.8 -10.1 -12.9 14.0 46.0 25.1 32.5 -12.1 28.9Other Income 3,801 5,721 5,464 7,143 3,685 3,388 5,750 8,821 22,129 21,643Net Income 12,742 13,590 14,808 16,368 13,877 14,877 17,440 21,041 57,507 67,236Operating Expenses 6,621 7,086 7,230 6,976 6,841 7,142 8,000 9,830 27,913 31,813Operating Profit 6,121 6,503 7,578 9,392 7,036 7,735 9,440 11,211 29,594 35,423% Change (Y-o-Y) 3.7 5.7 8.0 -6.6 15.0 18.9 24.6 19.4 1.6 19.7Other Provisions 3,015 1,787 1,990 3,751 5,409 1,441 1,000 1,973 10,544 9,823Profit before Tax 3,106 4,716 5,588 5,641 1,627 6,294 8,440 9,239 19,050 25,600Tax Provisions 700 700 1,000 1,000 400 1,000 2,532 2,212 3,400 6,144Net Profit 2,406 4,016 4,588 4,641 1,227 5,294 5,908 7,027 15,650 19,456% Change (Y-o-Y) 26.0 11.0 26.1 -8.0 -49.0 31.8 28.8 51.4 10.1 24.3Interest Exp./Interest Income (%) 73.5 77.4 73.7 75.6 72.7 72.0 73.1 73.1 75.1 72.8Other Income/Net Income (%) 52.0 52.1 48.8 42.6 49.3 48.0 45.9 46.7 48.5 47.3Cost to Income Ratio (%) 29.8 42.1 36.9 43.6 26.6 22.8 33.0 41.9 38.5 32.2Provisions/Operating Profits (%) 49.3 27.5 26.3 39.9 76.9 18.6 10.6 17.6 35.6 27.7Tax Rate (%) 22.5 14.8 17.9 17.7 24.6 15.9 30.0 23.9 17.8 24.0E: MOSL EstimatesAjinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) + 91 22 3982 5426/Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 541531 December 200875

Results PreviewSECTOR: BANKINGCorporation BankSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGCRPBK INREUTERS CODECRBK.BO31 December 2008Previous Recommendation: NeutralBuyRs189Equity Shares (m) 143.452-Week Range 484/1551,6,12 Rel.Perf.(%) 1/1/-4M.Cap. (Rs b) 27.1M.Cap. (US$ b) 0.6YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO3/07A 19,436 5,361 37.4 20.6 5.0 0.7 12.8 15.0 1.2 0.73/08A 21,431 7,350 51.2 37.1 3.7 0.6 12.0 18.4 1.2 0.73/09E 24,236 8,326 58.0 13.3 3.3 0.6 11.0 18.3 1.2 0.63/10E 27,855 8,735 60.9 4.9 3.1 0.5 11.0 16.8 1.0 0.5? We expect business growth to remain strong at 25%+. We expect margins to remain under pressure. In 2QFY09,NIMs fell by 42bp YoY to 2.43%.? We expect operating profit to grow 40% due to strong growth in NII, higher trading profits (Rs600m in 3QFY09 v/sRs475m in 3QFY08).? Asset quality remains robust with net NPAs at 0.4%. We do not expect any material weakening of the asset portfoliofor the bank. We expect MTM gains on Rs0.6b during 3QFY09.? Cost efficiencies (C/I ratio at ~40%), strong Tier I capital at 9.5%+ and robust asset quality are key strengths ofCorporation Bank. We expect RoE to remain healthy at 17-18%+ with Tier I >8% over next two years despite risingNPA costs. Valuations are attractive at 3.3x FY09E EPS and 0.6x FY09E BV. Upgrade to Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEInterest Income 11,004 10,779 10,989 12,535 12,887 14,488 15,357 16,324 45,166 59,056Interest Expense 7,479 7,092 7,652 8,510 9,107 10,421 11,202 11,990 30,732 42,720Net Interest Income 3,525 3,687 3,337 4,026 3,780 4,067 4,154 4,334 14,433 16,336% Change (Y-o-Y) 16.6 22.2 6.0 3.4 7.2 10.3 24.5 7.7 10.3 13.2Other Income 1,384 1,690 1,670 2,112 1,576 1,744 2,250 2,332 6,998 7,901Net Income 4,909 5,377 5,007 6,138 5,356 5,810 6,404 6,666 21,431 24,236Operating Expenses 2,154 2,432 2,231 2,103 2,146 2,295 2,525 2,826 8,920 9,792Operating Profit 2,756 2,945 2,776 4,035 3,210 3,515 3,879 3,840 12,511 14,444% Change (Y-o-Y) -8.6 33.4 1.1 17.6 16.5 19.3 39.8 -4.8 9.7 15.4Other Provisions 200 542 97 1,019 1,008 558 300 334 1,857 2,200Profit before Tax 2,556 2,404 2,678 3,016 2,201 2,957 3,579 3,506 10,654 12,244Tax Provisions 785 790 769 960 358 1,042 1,253 1,265 3,304 3,918Net Profit 1,771 1,614 1,909 2,056 1,843 1,915 2,327 2,241 7,350 8,326% Change (Y-o-Y) 22.8 27.1 30.4 73.5 4.1 18.7 21.9 9.0 37.1 13.3Interest Exp./Interest Income (%) 68.0 65.8 69.6 67.9 70.7 71.9 72.9 73.4 68.0 72.3Other Income/Net Income (%) 28.2 31.4 33.3 34.4 29.4 30.0 35.1 35.0 32.7 32.6Cost to Income Ratio (%) 43.9 45.2 44.6 34.3 40.1 39.5 39.4 42.4 41.6 40.4Provisions/Operating Profits (%) 7.2 18.4 3.5 25.3 31.4 15.9 7.7 8.7 14.8 15.2Tax Rate (%) 30.7 32.9 28.7 31.8 16.3 35.2 35.0 36.1 31.0 32.0E: MOSL EstimatesAjinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) + 91 22 3982 5426/Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 541531 December 200876

Results PreviewSECTOR: BANKINGFederal BankSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGFB INREUTERS CODEFED.BO31 December 2008Previous Recommendation: BuyBuyRs162Equity Shares (m) 171.052-Week Range 366/1131,6,12 Rel.Perf.(%) 15/17/1M.Cap. (Rs b) 27.7M.Cap. (US$ b) 0.6YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO3/07A 10,191 2,927 34.2 30.0 4.7 0.9 13.4 21.3 1.3 1.03/08A 12,630 3,680 21.5 -37.1 7.5 0.7 22.5 13.6 1.3 0.73/09E 17,599 4,579 26.8 24.4 6.1 0.7 17.8 11.2 1.3 0.73/10E 20,430 5,573 32.6 21.7 5.0 0.6 17.4 12.5 1.3 0.6? We expect NII growth of 62% on the back of 27% growth in loan book and improved margins due to capital raisingduring 4QFY08.? We expect 50%+ growth in fee-based income. In 1HFY09, fee-based income grew 68% YoY.? We expect the bank to reverse MTM provisions of Rs500m. MTM loss on equity portfolio is likely to offset bondgains. We expect Federal Bank to accelerate NPA provisions during the quarter.? Federal Bank is a value pick.The stock trades at 6.1x FY09E EPS and 0.7x FY09E BV with RoA of 1.3%+, howeverRoE is likely to remain lower due to lower leverage. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEInterest Income 5,553 5,943 6,487 7,172 7,451 8,281 8,512 9,043 25,154 33,287Interest Expense 3,665 3,918 4,450 4,442 4,669 4,963 5,222 5,348 16,474 20,202Net Interest Income 1,889 2,024 2,037 2,730 2,782 3,318 3,290 3,695 8,680 13,085% Change (Y-o-Y) 22.2 23.9 16.6 22.0 47.3 63.9 61.5 35.3 21.1 50.7Other Income 1,044 808 850 1,249 962 1,042 1,250 1,260 3,950 4,514Net Income 2,932 2,832 2,887 3,979 3,744 4,360 4,540 4,955 12,630 17,599Operating Expenses 1,048 1,066 1,210 1,365 1,209 1,331 1,400 1,443 4,689 5,382Operating Profit 1,884 1,766 1,676 2,614 2,535 3,029 3,140 3,512 7,941 12,217% Change (Y-o-Y) 65.7 27.1 23.7 16.3 34.5 71.5 87.3 34.3 29.6 53.8Other Provisions 670 548 345 1,377 1,724 1,569 1,050 1,557 2,940 5,900Profit before Tax 1,214 1,218 1,331 1,238 811 1,461 2,090 1,955 5,002 6,317Tax Provisions 545 265 302 209 130 318 732 558 1,321 1,737Net Profit 669 953 1,029 1,029 682 1,143 1,359 1,397 3,680 4,579% Change (Y-o-Y) 66.6 37.2 22.8 3.6 1.8 19.9 32.0 35.8 25.7 24.4Interest Exp./Interest Income (%) 66.0 65.9 68.6 61.9 62.7 59.9 61.3 59.1 65.5 60.7Other Income/Net Income (%) 35.6 28.5 29.4 31.4 25.7 23.9 27.5 25.4 31.3 25.7Cost to Income Ratio (%) 35.7 37.6 41.9 34.3 32.3 30.5 30.8 29.1 37.1 30.6Provisions/Operating Profits (%) 35.6 31.0 20.6 52.7 68.0 51.8 33.4 44.3 37.0 48.3Tax Rate (%) 44.9 21.8 22.7 16.9 16.0 21.8 35.0 28.5 26.4 27.5E: MOSL EstimatesAjinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) + 91 22 3982 5426/Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 541531 December 200877

Results PreviewSECTOR: BANKINGSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGHDFC INREUTERS CODEHDFC.BO31 December 2008Previous Recommendation: BuyHDFCBuyRs1,488Equity Shares (m) 319.452-Week Range 3,257/1,2021,6,12 Rel.Perf.(%) -4/4/4M.Cap. (Rs b) 475.1M.Cap. (US$ b) 9.8YEAR NET INCOME PAT EPS EPS P/E# P/BV CAR ROAE ROAA P/ABV*END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO3/07A 21,964 15,704 62.1 23.2 16.9 6.8 13.0 29.0 2.5 5.83/08A 30,532 24,363 68.4 10.3 15.3 3.5 16.5 22.2 2.7 2.83/09E 35,533 22,682 78.8 15.2 13.5 3.1 14.0 17.7 2.5 2.63/10E 42,668 27,362 95.1 20.6 10.5 2.8 12.5 18.9 2.6 2.3* Price is adjusted for value of key ventures. Book Value is adjusted by deducting investments inkey ventures from net worth? We expect HDFC’s disbursement growth to be 12% YoY in 3QFY09- significantly lower than 25% growth registeredin 1HFY09. We expect loan growth to slow down from ~30% YoY in 2QFY09 to 26% YoY in 3QFY09.? During 3QFY08, there was Rs1.2b exceptional gain (before tax) on stake sale in Standard Life and Rs1b normaltreasury gain on stake sale in CAMS. As 3QFY09 is expected to have no investment gain, we expect reportedearnings to decline 8% YoY. Adjusted for these two investment gains in 3QFY08, this would translate to 26%earnings growth in 3QFY09.? Adjusting for the value of its investments, HDFC is available at 10.5x FY10E EPS. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEIncome from Operations 18,270 18,886 21,504 23,112 23,135 26,151 27,453 29,019 81,764 105,758Other Income 34 39 44 90 51 55 60 74 197 240Reported Total Income 18,304 18,925 21,547 23,202 23,186 26,206 27,513 29,093 81,961 105,998Total Income ex Invst. Profits 18,080 18,876 20,513 23,159 23,186 25,980 27,513 29,069 80,628 105,748YoY Change (%) 51.0 41.1 47.6 40.8 28.2 37.6 34.1 25.5 39.8 29.3Interest and Other Charges 12,451 12,238 13,160 13,598 15,684 17,573 18,371 18,838 51,429 70,465Other Expenses 765 823 741 664 967 991 1,000 906 2,993 3,864Total Expenses 13,217 13,061 13,901 14,262 16,651 18,563 19,371 19,744 54,422 74,329PBDT 5,087 5,864 7,646 8,940 6,535 7,643 8,142 9,349 27,538 31,669YoY Change (%) 33.7 23.7 70.4 31.2 28.5 30.3 6.5 4.6 41.1 15.0Depreciation 37 40 44 45 37 43 40 47 166 166PBT Pre Exceptional Income 5,050 5,824 7,602 8,896 6,499 7,600 8,102 9,303 27,372 31,503PBT Ex Invest. Profits 4,826 5,775 6,568 8,870 6,499 7,374 8,102 9,278 26,040 31,253YoY Change (%) 48.2 64.1 74.7 50.7 34.7 27.7 23.3 4.6 34.6 20.0Exceptional Profits 0 3,133 1,209 2,021 0 0 0 0 6,363 0Reported PBT 5,050 8,957 8,812 10,916 6,499 7,600 8,102 9,303 33,735 31,503Provision for Tax 1,322 2,493 2,323 3,235 1,818 2,258 2,106 2,639 9,373 8,821Reported PAT 3,728 6,464 6,489 7,681 4,681 5,342 5,995 6,663 24,363 22,682YoY Change (%) 25.6 75.6 82.5 39.6 25.6 -17.4 -7.6 -13.3 55.1 -6.9PAT Ex-exceptional 3,728 4,034 5,554 6,118 4,681 5,342 5,995 6,663 19,442 22,682YoY Change (%) 25.6 9.6 56.2 11.2 25.6 32.4 7.9 8.9 34.0 16.7E: MOSL EstimatesAjinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) + 91 22 3982 5426/Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 541531 December 200878

Results PreviewSECTOR: BANKINGSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGHDFCB INREUTERS CODEHDBK.BO31 December 2008Previous Recommendation: BuyHDFC BankBuyRs998Equity Shares (m) 450.552-Week Range 1,825/8001,6,12 Rel.Perf.(%) 2/28/10M.Cap. (Rs b) 449.4M.Cap. (US$ b) 9.2YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO3/08A* 88,645 17,386 41.0 21.1 24.8 3.1 13.5 16.1 1.3 3.23/09E 105,244 22,600 53.3 30.0 19.1 2.9 10.7 15.8 1.3 3.03/10E 131,532 28,595 67.4 26.5 15.1 2.5 9.9 17.9 1.4 2.7* Includes pro forma merged figures for HDFC Bank and CBoP? HDFC Bank would consolidate CBoP in 3QFY09. We have included the impact of CBoP merger in our 3QFY09estimates.? On an adjusted basis, we expect loans to grow by 28% YoY and deposits to grow 21% YoY. We expect margins toimprove QoQ.? On a reported basis, we expect HDFC Bank to report 43% earnings growth. However adjusted for CBoP acquisition,earnings growth is expected to be ~29%.? We expect fee income growth on adjusted basis to be muted at ~7% YoY as CBoP’s fee income is expected to belower YoY. Treasury income during 3QFY09 (v/s losses of Rs160m reported in 2QFY09) can lead to a strong 20%+QoQ growth in other income.? We have not considered conversion of warrants by HDFC during FY10 in our estimates. We estimate PAT CAGRof 28% over FY08-FY10E with RoE increasing to 18% by FY10 (combining CBoP with HDFC Bank from FY08itself). Stock trades at 2.5x FY10E BV and 15.1x FY10E EPS. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09* FY08 FY09E*1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEInterest Income 20,692 23,628 27,269 29,562 36,217 39,912 42,048 43,520 101,150 161,697Interest Expense 10,836 12,001 12,893 13,141 18,983 21,248 22,326 22,802 48,871 85,358Net Interest Income 9,855 11,627 14,376 16,421 17,234 18,665 19,722 20,718 52,279 76,339Growth (%) 30.1 47.6 65.6 55.7 74.9 60.5 37.2 26.2 50.7 46.0Other Income 5,725 4,824 6,789 5,493 5,934 6,431 7,921 8,619 22,825 28,905Net Income 15,581 16,451 21,165 21,914 23,169 25,096 27,643 29,337 75,103 105,244Operating Expenses 7,744 8,184 10,501 11,027 12,894 13,867 14,299 15,336 37,456 56,396Operating Profit 7,837 8,267 10,664 10,887 10,275 11,229 13,344 14,002 37,647 48,848Growth (%) 41.0 36.3 67.5 42.3 31.1 35.8 25.1 28.6 46.8 29.8Provisions and Contingencies 3,071 2,894 4,231 4,651 3,445 3,460 4,300 4,408 14,843 15,613Profit before Tax 4,766 5,373 6,432 6,236 6,830 7,768 9,044 9,593 22,804 33,235Provision for Taxes 1,553 1,688 2,139 1,525 2,187 2,488 2,894 3,066 6,905 10,635Net Profit 3,212 3,685 4,294 4,711 4,643 5,280 6,150 6,527 15,899 22,600Growth (%) 34.2 40.1 45.2 37.1 44.5 43.3 43.2 38.5 39.3 42.1Int Exp/ Int Earned (%) 52.4 50.8 47.3 44.5 52.4 53.2 53.1 52.4 48.3 52.8Other Income/Total Income (%) 36.7 29.3 32.1 25.1 25.6 25.6 28.7 29.4 30.4 27.5Cost to Income Ratio (%) 49.7 49.7 49.6 50.3 55.7 55.3 51.7 52.3 49.9 53.6Provisions/Operating Profit % 39.2 35.0 39.7 42.7 33.5 30.8 32.2 31.5 39.4 32.0Tax Payout % 32.6 31.4 33.2 24.4 32.0 32.0 32.0 32.0 30.3 32.0E: MOSL Estimates; *FY09 numbers include merger of CBoP. They are not strictly comparable to FY08 numbersAjinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) + 91 22 3982 5426/Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 541531 December 200879

Results PreviewSECTOR: BANKINGICICI BankSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGICICIBC INREUTERS CODEICBK.BO31 December 2008Previous Recommendation: BuyBuyRs448Equity Shares (m) 1,112.752-Week Range 1,465/2821,6,12 Rel.Perf.(%) 21/-1/-11M.Cap. (Rs b) 498.9M.Cap. (US$ b) 10.3YEAR NET INCOME PAT EPS EPS P/E AP/E* P/BV AP/ABV* CAR ROEEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (X) (X) (%) (%)3/07A 125,650 31,102 34.6 21.2 13.0 8.3 1.7 1.2 11.7 13.43/08A 161,149 41,577 37.4 8.0 12.0 7.7 1.1 0.8 14.0 11.73/09E 161,559 36,540 32.8 -12.1 13.7 8.8 1.0 0.7 14.9 7.73/10E 191,805 46,921 42.2 28.4 10.6 6.6 1.0 0.7 14.1 9.3*Price is adjusted for value of key ventures; Book value adjusted for investment in subsidiaries? We expect muted loan growth of ~4% YoY as retail loan growth has slowed down significantly. We expect depositsto decline 6% YoY due to net repayment of bulk deposits in the quarter.? Liquidity crunch observed in September and October 2008 would have an adverse impact on ICICI Bank’s cost offunds during 3QFY09. However CRR and SLR cuts, benign wholesale rates during December 2008 would haveenabled the bank to repay higher cost deposits during the quarter. Overall we expect margins to remain flat QoQ.? On a high base of 3QFY09, we expect fees to degrow by ~10% YoY. Also due to absence of venture capital gains in3QFY09, we expect a sharp decline in other income on YoY basis.? With deteriorating asset quality and exposure to riskier asset classes, we expect NPA provisions to remain high.? Excluding the subsidiaries, the stock trades at 13.7x FY09E EPS and 1x FY09E BV. We maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEInterest Income 73,308 75,165 79,118 80,293 78,918 78,350 76,948 78,674 307,883 312,890Interest Expense 58,519 57,305 59,521 59,498 58,021 56,874 56,288 56,715 234,842 227,897Net Interest Income 14,790 17,860 19,597 20,795 20,898 21,476 20,659 21,959 73,041 84,993Y-o-Y Growth (%) 22.4 33.9 32.0 29.3 41.3 20.2 5.4 5.6 29.6 16.4Other Income 19,506 20,719 24,266 23,617 15,382 18,773 20,565 21,847 88,108 76,567Net Income 34,295 38,579 43,863 44,411 36,279 40,250 41,224 43,806 161,149 161,559Operating Expenses 19,053 19,708 21,276 21,505 19,136 17,400 17,800 17,920 81,542 72,256Operating Profit 15,242 18,871 22,587 22,907 17,144 22,849 23,424 25,887 79,607 89,303Y-o-Y Growth (%) 58.0 37.8 28.9 28.1 12.5 21.1 3.7 13.0 35.5 12.2Provisions and Contingencies 5,523 6,445 7,603 9,475 7,925 9,235 10,000 12,765 29,046 39,925Profit before Tax 9,720 12,427 14,984 13,432 9,219 13,614 13,424 13,122 50,561 49,378Provision for Taxes 1,969 2,401 2,681 1,933 1,935 3,472 3,490 3,941 8,984 12,838Net Profit 7,751 10,026 12,303 11,498 7,283 10,142 9,934 9,181 41,577 36,540Y-o-Y Growth (%) 25.1 32.7 35.2 39.4 -6.0 1.2 -19.3 -20.2 33.7 -12.1Int Exp/ Int Earned (%) 79.8 76.2 75.2 74.1 73.5 72.6 73.2 72.1 76.3 72.8Other Income / Net Income (%) 56.9 53.7 55.3 53.2 42.4 46.6 49.9 49.9 54.7 47.4Cost to Income Ratio (%) 55.6 51.1 48.5 48.4 52.7 43.2 43.2 40.9 50.6 44.7Provisions/Operating Profit (%) 36.2 34.2 33.7 41.4 46.2 40.4 42.7 49.3 36.5 44.7Tax Rate (%) 20.3 19.3 17.9 14.4 21.0 25.5 26.0 30.0 17.8 26.0E: MOSL EstimatesAjinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) + 91 22 3982 5426/Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 541531 December 200880

Results PreviewSECTOR: BANKINGSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGINBK INREUTERS CODEINBA.BO31 December 2008Previous Recommendation: BuyIndian BankBuyRs137Equity Shares (m) 429.852-Week Range 256/781,6,12 Rel.Perf.(%) 5/83/23M.Cap. (Rs b) 58.8M.Cap. (US$ b) 1.2YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO3/07A 26,052 7,598 17.7 39.3 7.7 1.8 14.1 29.9 1.5 1.83/08A 30,596 10,087 23.5 32.8 5.8 1.3 12.9 25.8 1.6 1.33/09E 36,521 11,903 27.7 18.0 4.9 1.1 11.4 23.6 1.6 1.13/10E 41,587 12,639 29.4 6.2 4.7 0.9 10.2 21.3 1.5 0.9? We expect loan book growth to remain strong at 35%+. During 1HFY09, the bank reduced the share of bulk depositsto 10.3% (14.4% in 4QFY08), improved CASA ratio to 33.1% (32.3% in 4QFY08). The control on cost of funds andimpact of CRR cut (released ~Rs16b) will help the bank maintain margins despite the PLR cut of 75bp in 3QFY09.? We expect fees to grow strong at 30%+. We expect recoveries to fall to Rs450m v/s Rs1.2b booked in 3QFY08.Higher-than-expected recoveries would provide upside to our earnings estimates.? We expect the bank to reverse the MTM provisions of Rs2b on bond portfolio in 3QFY09. In 1HFY09, the bankbooked the MTM provision of Rs2.5b.? Asset quality of the bank remains strong with GNPA at 0.98% and net NPA at 0.18%. We have factored in acceleratedNPA provisions as operating profit growth remains strong.? The stock is trading at 4.9x FY09E EPS and 1.1x FY09E BV. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEInterest Income 11,952 12,574 13,754 13,600 15,018 16,882 17,793 18,755 51,508 68,448Interest Expense 7,124 7,862 8,137 8,468 9,623 10,063 10,916 11,649 31,591 42,250Net Interest Income 4,828 4,712 5,617 5,132 5,395 6,818 6,878 7,106 19,917 26,197% Change (Y-o-Y) 24.8 9.1 35.7 -6.7 11.7 44.7 22.4 38.5 11.8 31.5Other Income 1,815 2,357 3,006 3,129 2,432 2,128 2,850 2,914 10,679 10,324Net Income 6,644 7,069 8,623 8,261 7,827 8,946 9,728 10,020 30,596 36,521Operating Expenses 3,346 3,635 3,991 3,031 3,461 3,618 3,600 3,664 14,003 14,343Operating Profit 3,297 3,434 4,632 5,230 4,366 5,328 6,128 6,356 16,593 22,178% Change (Y-o-Y) 43.7 15.5 59.6 -3.4 32.4 55.1 32.3 21.5 17.4 19.4Other Provisions 907 497 1,057 1,782 1,690 1,089 1,450 2,077 4,243 6,307Profit before Tax 2,390 2,937 3,575 3,448 2,676 4,239 4,678 4,279 12,350 15,871Tax Provisions 270 461 500 1,031 500 1,409 936 1,123 2,262 3,968Net Profit 2,120 2,476 3,075 2,417 2,176 2,829 3,742 3,156 10,087 11,903% Change (Y-o-Y) 28.7 46.4 61.4 2.7 2.6 14.3 21.7 30.6 32.8 18.0Interest Exp./Interest Income (%) 59.6 62.5 59.2 62.3 64.1 59.6 61.3 62.1 61.3 61.7Other Income/Net Income (%) 27.3 33.3 34.9 37.9 31.1 23.8 29.3 29.1 34.9 28.3Cost to Income Ratio (%) 50.4 51.4 46.3 36.7 44.2 40.4 37.0 36.6 45.8 39.3Provisions/Operating Profits (%) 27.5 14.5 22.8 34.1 38.7 20.4 23.7 32.7 25.6 28.4Tax Rate (%) 11.3 15.7 14.0 29.9 18.7 33.3 20.0 26.2 18.3 25.0E: MOSL EstimatesAjinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) + 91 22 3982 5426/Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 541531 December 200881

Results PreviewSECTOR: BANKINGSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGIOB INREUTERS CODEIOBK.BO31 December 2008Previous Recommendation: BuyIndian Overseas BankBuyRs72Equity Shares (m) 544.852-Week Range 229/601,6,12 Rel.Perf.(%) 9/18/-7M.Cap. (Rs b) 39.1M.Cap. (US$ b) 0.8YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO3/07A 29,478 10,084 18.5 28.7 3.9 1.0 13.3 29.1 1.4 1.13/08A 34,871 11,973 22.0 18.7 3.3 0.8 11.1 27.8 1.3 0.93/09E 40,789 13,050 24.0 9.0 3.0 0.7 11.8 24.8 1.2 0.73/10E 48,703 13,847 25.4 6.1 2.8 0.6 11.5 21.9 1.1 0.6? We expect NII to grow 24% YoY on the back of the lower base effect and strong loan growth. We expect loans togrow 35% YoY largely on account of the lower base effect.? Strong growth in fee-based income (~30%) and trading profits (grow 3x YoY) are likely to keep non-interest incomegrowth strong.? Operating expenses likely to increase as the bank has started making provisions for the likely wage revisions. It hasalready provided Rs720m in 1HFY09 and expects it to be Rs1b.? IOB’s provision coverage worsened to 42% in 2QFY09 due to large slippages. We expect the bank to improveprovision coverage during the quarter, as operating profit growth would remain strong.? PAT growth is likely to be 23% in 3QFY09, driven by higher growth in net interest income and treasury profits.? The stock is trading at 3x FY09E EPS and 0.7x FY09E BV. We maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEInterest Income 18,462 19,303 20,759 21,159 22,171 24,270 25,507 26,384 79,683 98,332Interest Expense 11,372 12,982 14,199 14,335 14,909 16,420 17,379 18,210 52,888 66,919Net Interest Income 7,090 6,321 6,560 6,823 7,262 7,850 8,128 8,174 26,795 31,413% Change (Y-o-Y) 23.2 3.3 8.4 -11.2 2.4 24.2 23.9 19.8 4.6 17.2Other Income 616 1,745 2,195 3,521 -303 2,835 3,900 2,943 8,076 9,375Net Income 7,706 8,066 8,755 10,344 6,959 10,684 12,028 11,117 34,871 40,789Operating Expenses 3,614 3,486 3,824 3,929 4,547 4,670 4,325 3,978 14,853 17,520Operating Profit 4,092 4,580 4,931 6,415 2,412 6,014 7,703 7,140 20,018 23,268% Change (Y-o-Y) 93.8 27.5 15.2 14.2 -41.1 31.3 56.2 11.3 28.3 16.2Other Provisions 620 83 367 2,398 -605 1,790 2,450 1,998 3,521 5,633Profit before Tax 3,472 4,497 4,564 4,017 3,017 4,224 5,253 5,141 16,497 17,635Tax Provisions 787 1,300 1,482 957 457 633 1,471 2,023 4,524 4,585Net Profit 2,685 3,197 3,082 3,060 2,560 3,590 3,782 3,118 11,973 13,050% Change (Y-o-Y) 20.9 28.0 24.9 5.6 -4.7 12.3 22.7 1.9 18.7 9.0Interest Exp./Interest Income (%) 61.6 67.3 68.4 67.8 67.2 67.7 68.1 69.0 66.4 68.1Other Income/Net Income (%) 8.0 21.6 25.1 34.0 -4.3 26.5 32.4 26.5 23.2 23.0Cost to Income Ratio (%) 46.9 43.2 43.7 38.0 65.3 43.7 36.0 35.8 42.6 43.0Provisions/Operating Profits (%) 15.2 1.8 7.4 37.4 -25.1 29.8 31.8 28.0 17.6 24.2Tax Rate (%) 22.7 28.9 32.5 23.8 15.2 15.0 28.0 39.4 27.4 26.0E: MOSL EstimatesAjinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) + 91 22 3982 5426/Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 541531 December 200882

Results PreviewSECTOR: BANKINGJammu & Kashmir BankSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGJKBK INREUTERS CODEJKBK.BO31 December 2008Previous Recommendation: BuyBuyRs355Equity Shares (m) 48.552-Week Range 970/2681,6,12 Rel.Perf.(%) 11/-4/-6M.Cap. (Rs b) 17.2M.Cap. (US$ b) 0.4YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO3/07A 9,281 2,745 56.6 55.2 6.3 0.9 13.2 14.4 1.0 0.93/08A 10,555 3,600 74.2 31.2 4.8 0.7 12.8 16.7 1.2 0.83/09E 12,924 4,838 99.8 34.4 3.6 0.6 11.6 19.4 1.4 0.73/10E 15,389 5,682 117.2 17.4 3.0 0.5 11.6 19.5 1.3 0.6? NII is expected to grow 35% to Rs2.7b in 3QFY09 on the back of loan growth of 20%+. We expect the margins toremain stable at 3.2% (reported in 1HFY09), however to improve YoY by ~30bp.? Other income growth is likely to be subdued due to lackluster fee-based income growth. However, higher treasuryprofits can provide upside to our earnings estimates.? Asset quality remains robust with GNPA ratio at 2.3% and NNPA ratio at 0.96%. We expect the slippages likely tobe controlled and the provisions on NPA to remain low.? In 1HFY09, the bank provided Rs220m on MTM hit on the debt instruments and a part of which is likely to bereversed in the current quarter.? The stock trades at 3.6x FY09E EPS and 0.6x FY09E BV. We maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEInterest Income 5,751 5,967 6,183 6,442 6,514 7,478 7,926 8,328 24,342 30,246Interest Expense 3,854 4,016 4,169 4,198 4,252 4,865 5,205 5,497 16,238 19,818Net Interest Income 1,896 1,951 2,013 2,244 2,263 2,613 2,721 2,832 8,104 10,429% Change (Y-o-Y) 6.2 1.7 3.2 10.9 19.3 33.9 35.2 26.2 5.5 28.7Other Income 358 581 705 806 649 411 650 786 2,450 2,496Net Income 2,254 2,532 2,718 3,050 2,911 3,024 3,371 3,618 10,555 12,924Operating Expenses 943 1,034 1,039 1,021 1,096 1,148 1,175 1,184 4,036 4,603Operating Profit 1,312 1,498 1,679 2,029 1,815 1,876 2,196 2,434 6,518 8,321% Change (Y-o-Y) 11.7 10.0 20.8 38.0 38.4 25.2 30.8 20.0 17.3 27.7Other Provisions 190 40 88 441 414 243 150 293 759 1,100Profit before Tax 1,122 1,458 1,591 1,588 1,401 1,633 2,046 2,141 5,760 7,221Tax Provisions 289 380 500 990 455 474 716 738 2,160 2,383Net Profit 832 1,078 1,091 598 946 1,159 1,330 1,403 3,600 4,838% Change (Y-o-Y) 33.4 30.0 30.1 32.1 13.6 7.5 21.9 134.7 31.2 34.4Interest Exp./Interest Income (%) 67.0 67.3 67.4 65.2 65.3 65.1 65.7 66.0 66.7 65.5Other Income/Net Income (%) 15.9 22.9 25.9 26.4 22.3 13.6 19.3 21.7 23.2 19.3Cost to Income Ratio (%) 41.8 40.8 38.2 33.5 37.7 38.0 34.9 32.7 38.2 35.6Provisions/Operating Profits (%) 14.5 2.7 5.2 21.7 22.8 12.9 6.8 12.0 11.6 13.2Tax Rate (%) 25.8 26.1 31.4 62.4 32.5 29.0 35.0 34.5 37.5 33.0E: MOSL EstimatesAjinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) + 91 22 3982 5426/Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 541531 December 200883

Results PreviewSECTOR: BANKINGKarnataka BankSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGKBL INREUTERS CODEKNBK.BO31 December 2008Previous Recommendation: BuyBuyRs79Equity Shares (m) 121.452-Week Range 286/641,6,12 Rel.Perf.(%) -2/-15/-12M.Cap. (Rs b) 9.6M.Cap. (US$ b) 0.2YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO3/07A 5,941 1,770 14.6 0.5 5.4 0.8 11.5 15.1 1.1 0.83/08A 6,962 2,417 19.9 36.6 4.0 0.7 12.2 18.5 1.4 0.73/09E 8,390 2,615 21.5 8.2 3.7 0.6 12.5 17.7 1.2 0.63/10E 9,587 2,809 23.1 7.4 3.4 0.5 12.5 16.8 1.1 0.6? We expect NII to grow 26% with stable margins. Loan growth is likely to be 24%. The bank has built up significantliquidity in its balance sheet with the credit to deposit ratio at 63%. Hence incremental C-D ratio is likely to be higherthan 100%, which can help improve margins.? The bank has shown robust growth in traditional fee income of 32% during FY08. We expect the strong traction infee-based income to continue in, 3QFY09 as well.? Karnataka Bank is a play on stable growth with improving key operating parameters. The stock trades at 3.7xFY09E EPS and 0.6x FY09E BV. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEInterest Income 3,619 3,828 4,055 4,207 4,579 4,685 4,919 5,271 15,708 19,454Interest Expense 2,375 2,721 2,897 3,024 3,171 3,300 3,465 3,707 11,017 13,644Net Interest Income 1,244 1,106 1,158 1,183 1,408 1,385 1,454 1,564 4,691 5,811% Change (Y-o-Y) 30.5 22.0 10.2 -8.2 13.2 25.2 25.6 32.2 11.7 23.9Other Income 418 569 739 545 498 525 776 779 2,271 2,579Net Income 1,662 1,675 1,897 1,728 1,906 1,910 2,230 2,343 6,962 8,390Operating Expenses 623 768 682 982 747 750 844 942 3,056 3,283Operating Profit 1,038 907 1,215 746 1,159 1,160 1,387 1,401 3,906 5,107% Change (Y-o-Y) 17.8 22.5 35.8 -28.9 11.6 27.8 14.1 87.9 9.5 30.7Other Provisions 246 -86 105 253 1,030 100 200 145 518 1,475Profit before Tax 792 993 1,110 493 129 1,060 1,187 1,256 3,388 3,632Tax Provisions 275 392 420 -115 -78 339 380 376 971 1,017Net Profit 518 601 690 608 207 721 807 880 2,417 2,615% Change (Y-o-Y) 40.8 0.9 28.1 127.2 -60.0 19.9 16.9 44.8 36.6 8.2Interest Exp./Interest Income (%) 65.6 71.1 71.4 71.9 69.3 70.4 70.4 70.3 70.1 70.1Other Income/Net Income (%) 25.1 34.0 39.0 31.5 26.1 27.5 34.8 33.3 32.6 30.7Cost to Income Ratio (%) 37.5 45.8 36.0 56.9 39.2 39.3 37.8 40.2 43.9 39.1Provisions/Operating Profits (%) 23.7 -9.5 8.6 33.9 88.8 8.6 14.4 10.4 13.3 28.9Tax Rate (%) 34.6 39.5 37.8 -23.4 -60.1 32.0 32.0 29.9 28.7 28.0E: MOSL EstimatesAjinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) + 91 22 3982 5426/Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 541531 December 200884

Results PreviewSECTOR: BANKINGOriental Bank of CommerceSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGOBC INREUTERS CODEORBC.BO31 December 2008Previous Recommendation: NeutralNeutralRs154Equity Shares (m) 250.552-Week Range 321/1101,6,12 Rel. Perf.(%) -2/47/8M.Cap. (Rs b) 38.5M.Cap. (US$ b) 0.8YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO3/07A 22,946 8,268 33.0 2.9 4.7 0.8 12.5 15.4 1.2 0.83/08A 22,987 8,409 33.6 1.7 4.6 0.7 12.1 14.8 1.0 0.73/09E 29,403 9,902 39.5 17.8 3.9 0.6 11.0 16.0 1.0 0.63/10E 33,563 10,995 43.9 11.0 3.5 0.5 11.0 15.6 1.0 0.6? We expect the margin for OBC to remain under pressure in 3QFY09. The bank had increased the proportion of bulkdeposits and the share continues to remain 25%+. Higher proportion of bulk deposits coupled with the PLR cut wouldcontinue to have pressure on margins.? We expect the NII to grow 25% YoY to Rs5b. Adjusted NII is expected to grow 12% QoQ. In 2QFY09, the bankbooked interest on NPA recoveries in interest income.? We expect the trading profits to remain high during the quarter as the bank holds ~35% of the investment portfolio inthe AFS category. The bank has made the provision of Rs1.8b on AFS securities in 1HFY09. A large part of this islikely to be reversed in 3QFY09.? The stock is trading at 3.9x FY09E EPS and 0.6x FY09E BV. We maintain Neutral.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEInterest Income 15,341 16,457 17,479 19,105 19,537 21,518 22,434 23,641 68,382 87,131Interest Expense 10,910 12,462 13,456 14,734 15,070 16,302 17,407 18,416 51,562 67,195Net Interest Income 4,431 3,995 4,024 4,370 4,467 5,217 5,027 5,225 16,820 19,936% Change (Y-o-Y) 7.8 -3.2 -4.5 -2.1 0.8 30.6 25.0 19.5 -0.6 18.5Other Income 1,462 1,425 1,674 1,606 2,055 2,092 2,705 2,616 6,167 9,468Net Income 5,893 5,420 5,697 5,976 6,522 7,308 7,732 7,841 22,987 29,403Operating Expenses 2,642 2,698 2,730 2,726 2,985 3,241 3,000 2,875 10,796 12,100Operating Profit 3,251 2,722 2,967 3,250 3,537 4,067 4,732 4,966 12,190 17,303% Change (Y-o-Y) -7.4 -13.3 -3.2 0.0 8.8 49.4 59.5 52.8 -6.0 41.9Other Provisions 506 -191 258 -1,001 2,071 1,875 550 804 -429 5,300Profit before Tax 2,745 2,913 2,710 4,251 1,466 2,192 4,182 4,162 12,619 12,003Tax Provisions 741 551 713 2,206 -739 -177 1,464 1,553 4,210 2,101Net Profit 2,004 2,362 1,997 2,046 2,206 2,369 2,719 2,609 8,409 9,902% Change (Y-o-Y) 29.1 -24.0 -18.0 74.6 10.0 0.3 36.1 27.6 1.7 17.8Interest Exp./Interest Income (%) 71.1 75.7 77.0 77.1 77.1 75.8 77.6 77.9 75.4 77.1Other Income/Net Income (%) 24.8 26.3 29.4 26.9 31.5 28.6 35.0 33.4 26.8 32.2Cost to Income Ratio (%) 44.8 49.8 47.9 45.6 45.8 44.3 38.8 36.7 47.0 41.2Provisions/Operating Profits (%) 15.6 -7.0 8.7 -30.8 58.5 46.1 11.6 16.2 -3.5 30.6Tax Rate (%) 27.0 18.9 26.3 51.9 -50.4 -8.1 35.0 37.3 33.4 17.5E: MOSL EstimatesAjinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) + 91 22 3982 5426/Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 541531 December 200885

Results PreviewSECTOR: BANKINGSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGPNB INREUTERS CODEPNB.BO31 December 2008Previous Recommendation: BuyPunjab National BankBuyRs526Equity Shares (m) 315.352-Week Range 721/3321,6,12 Rel.Perf.(%) 11/68/32M.Cap. (Rs b) 165.9M.Cap. (US$ b) 3.4YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO3/07A 69,436 15,401 48.8 7.0 10.8 1.6 12.3 16.0 1.0 1.73/08A 75,317 20,488 65.0 33.0 8.1 1.5 13.5 19.6 1.1 1.63/09E 88,326 25,025 79.4 22.1 6.6 1.3 11.5 21.3 1.1 1.33/10E 101,971 27,757 88.0 10.9 6.0 1.1 10.5 20.2 1.1 1.2? On a lower base of 3QFY08, we expect loan and deposit growth to be very strong at ~37% and 27% YoY for PNB.Margins are expected to decline QoQ due to sharp PLR cuts during the quarter.? We expect ~25% YoY decline in treasury profits in 3QFY09. We expect fees to grow 15%.? We expect PNB to report strong 29% earnings growth due to core operations and writeback of provisions on AFSsecurities.? The stock is trading at 6.6x FY09E EPS and 1.3x FY09E BV. We maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEInterest Income 32,860 34,631 36,361 38,798 41,385 46,504 48,493 49,891 142,650 186,272Interest Expense 19,850 21,716 22,119 23,625 26,937 29,382 30,945 32,225 87,309 119,488Net Interest Income 13,010 12,915 14,242 15,173 14,448 17,122 17,548 17,666 55,342 66,784Y-o-Y Growth (%) 7.4 0.4 4.0 12.7 11.0 32.6 23.2 16.4 6.2 20.7Other Income 5,091 4,678 4,834 5,372 4,561 6,628 5,019 5,335 19,976 21,543Net Income 18,101 17,593 19,076 20,545 19,009 23,750 22,567 23,001 75,317 88,326Operating Expenses 8,770 9,043 9,165 8,277 9,185 10,072 10,189 10,368 35,255 39,813Operating Profit 9,331 8,550 9,912 12,268 9,824 13,678 12,378 12,633 40,062 48,513Y-o-Y Growth (%) 89.7 -5.0 3.6 39.0 5.3 60.0 24.9 3.0 10.7 21.1Provision & Contingencies 3,072 779 1,576 1,677 2,105 3,177 2,000 3,879 7,103 11,162Profit before tax 6,259 7,771 8,336 10,591 7,719 10,501 10,378 8,754 32,959 37,351Tax Provisions 2,009 2,386 2,923 5,154 2,595 3,430 3,425 2,876 12,472 12,326Net Profit 4,251 5,385 5,413 5,438 5,124 7,071 6,953 5,877 20,488 25,025Y-o-Y Growth (%) 15.7 6.6 25.9 128.8 20.5 31.3 28.5 8.1 33.0 22.1Int Exp/ Int Earned (%) 60.4 62.7 60.8 60.9 65.1 63.2 63.8 64.6 61.2 64.1Other Income / Net Income (%) 28.1 26.6 25.3 26.1 24.0 27.9 22.2 23.2 26.5 24.4Cost to Income Ratio (%) 48.4 51.4 48.0 40.3 48.3 42.4 45.2 45.1 46.8 45.1Provisions/Operating Profit (%) 32.9 9.1 15.9 13.7 21.4 23.2 16.2 30.7 17.7 23.0Tax Rate (%) 32.1 30.7 35.1 48.7 33.6 32.7 33.0 32.9 37.8 33.0E: MOSL Estimates; Quarterly and Annual numbers may not tally due to reclassificationAjinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) + 91 22 3982 5426/Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 541531 December 200886

Results PreviewSECTOR: BANKINGState Bank of IndiaSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGSBIN INREUTERS CODESBI.BO31 December 2008Previous Recommendation: BuyBuyRs1,288Equity Shares (m) 631.552-Week Range 2,397/9911,6,12 Rel.Perf.(%) 12/44/10M.Cap. (Rs b) 813.5M.Cap. (US$ b) 16.7YEAR NET INCOME PAT EPS CON. EPS CON. P/BV CON. CAR ROAE ROAAEND (RS B) (RS B) (RS) (RS) P/E (X) (X) P/BV (X) (%) (%) (%)3/07A 218,234 45,413 86.3 120.9 10.3 2.1 1.4 12.3 15.4 0.93/08A 257,162 67,291 106.6 141.9 8.8 1.6 1.2 13.5 16.8 1.03/09E 322,525 86,951 137.7 181.7 6.9 1.4 1.0 11.7 16.6 1.13/10E 380,821 97,145 153.8 207.2 6.0 1.3 0.9 11.1 16.4 1.0Consolidated? We expect loans and deposit growth to remain strong for the bank at ~30% YoY and 25% YoY respectively.? We expect margins to slightly come down during 3QFY09 (3.16% in 1HFY09) due to PLR cut and rising cost offunds.? We expect fee income growth to remain strong at ~40% YoY. In 3QFY08, the bank had strong equity gains. Thuson a higher base we expect treasury profits to be lower by ~20% YoY despite strong bond gains expected during3QFY09.? We have factored in Rs12b of writeback on the AFS portfolio in the quarter. We have factored in significantly higherNPA provisions for SBI during FY09 due to its lower provision coverage and increased NPA concerns. We note thatSBI can surprise positively on the provision front.? The stock is trading at 6.9x FY09E consolidated EPS and 1x FY09E consolidated BV. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEInterest Income 110,905 116,163 126,668 135,767 137,992 155,665 164,573 170,312 489,503 628,543Interest Expenses 68,891 78,534 84,105 87,761 89,815 101,112 108,519 112,922 319,291 412,367Net Interest Income 42,014 37,629 42,564 48,006 48,177 54,554 56,055 57,391 170,212 216,176Y-o-Y Growth (%) 19.0 6.3 23.8 5.6 14.7 45.0 31.7 19.5 0.0 27.0Other Income 11,386 20,419 26,972 28,172 24,039 23,431 25,831 33,048 86,949 106,350Net Income 53,400 58,049 69,536 76,178 72,215 77,985 81,886 90,439 257,162 322,525Operating Expenses 29,785 30,916 32,938 32,447 32,592 36,053 37,327 39,088 126,086 145,060Operating Profit 23,615 27,132 36,597 43,731 39,623 41,932 44,559 51,351 131,076 177,465Y-o-Y Growth (%) 30.8 28.4 55.7 10.2 67.8 54.5 21.8 17.4 0.0 35.4Provision & Contingencies 1,594 857 8,044 16,191 15,495 6,106 6,000 14,003 26,687 41,604Profit before Tax 22,021 26,275 28,553 27,540 24,129 35,826 38,559 37,348 104,389 135,861Provision for Taxes 7,763 10,161 10,467 8,707 7,721 13,229 14,267 13,694 37,098 48,910Net Profit 14,258 16,114 18,086 18,833 16,408 22,597 24,292 23,654 67,291 86,951Y-o-Y Growth (%) 78.5 36.0 69.8 26.1 15.1 40.2 34.3 25.6 48.2 29.2Int Exp/ Int Earned (%) 62.1 67.6 66.4 64.6 65.1 65.0 65.9 66.3 65.2 65.6Other Income / Net Income (%) 21.3 35.2 38.8 37.0 33.3 30.0 31.5 36.5 33.8 33.0Cost to Income Ratio (%) 55.8 53.3 47.4 42.6 45.1 46.2 45.6 43.2 49.0 45.0Provisions/Operating Profit (%) 6.7 3.2 22.0 37.0 39.1 14.6 13.5 27.3 20.4 23.4Tax Rate (%) 35.3 38.7 36.7 31.6 32.0 36.9 37.0 36.7 35.5 36.0E: MOSL EstimatesAjinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) + 91 22 3982 5426/Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 541531 December 200887

Results PreviewSECTOR: BANKINGUnion Bank of IndiaSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGUNBK INREUTERS CODEUNBK.BO31 December 2008Previous Recommendation: BuyBuyRs163Equity Shares (m) 505.152-Week Range 235/961,6,12 Rel.Perf.(%) 3/77/31M.Cap. (Rs b) 82.3M.Cap. (US$ b) 1.7YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO3/07A 34,767 8,454 16.7 25.3 9.7 1.7 12.8 19.2 0.9 1.93/08A 41,734 13,871 27.5 64.1 5.9 1.5 12.5 26.8 1.2 1.53/09E 49,697 16,737 33.1 20.7 4.9 1.2 11.5 26.6 1.2 1.23/10E 58,135 17,105 33.9 2.2 4.8 1.0 10.7 22.4 1.0 1.1? We expect loan growth and the deposit growth of ~28%. We expect margins to come under marginal pressure due tocut in PLR by 150bp. NII is expected to grow 30% YoY, however, it is expected to remain flat on a sequential basis.? Core fee income is likely to grow strongly at ~20% YoY in 3QFY09 on the back of the bank’s increased thrust onmarketing third party products and scaling up traditional non-fund based revenue. Treasury gains can fall YoY due toa heavy base of 3QFY08 (due to equity and venture capital gains).? In 1HFY09, the bank took a large MTM hit of Rs3b on its AFS. We have assumed the AFS provision reversal ofRs2.2b during 3QFY09.? The bank enjoys among the best asset quality with the GNPA at 1.9% and NNPA at 0.14%. However, on the backof the higher operating profits, we expect the bank to accelerate NPA provisions during the quarter.? The stock is trading at 4.9x FY09E EPS and 1.2x FY09E BV. We maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEInterest Income 20,741 22,384 24,227 25,664 25,332 28,313 30,295 32,275 93,016 116,214Interest Expense 13,399 15,820 16,705 17,685 17,232 18,560 20,517 22,150 63,609 78,458Net Interest Income 7,342 6,564 7,522 7,979 8,100 9,753 9,778 10,125 29,406 37,756% Change (Y-o-Y) 15.7 4.6 9.7 -5.3 10.3 48.6 30.0 26.9 11.6 28.4Other Income 2,150 2,873 3,838 3,467 2,217 2,833 3,350 3,542 12,327 11,941Net Income 9,492 9,436 11,360 11,446 10,317 12,586 13,128 13,667 41,734 49,697Operating Expenses 4,241 4,153 4,997 2,539 4,157 5,589 4,950 4,801 15,930 19,497Operating Profit 5,251 5,283 6,363 8,907 6,160 6,997 8,178 8,866 25,804 30,201% Change (Y-o-Y) 35.5 35.8 36.6 17.4 17.3 32.4 28.5 -0.5 29.0 17.0Other Provisions 1,554 976 1,150 3,520 2,957 2,033 550 752 7,199 6,291Profit before Tax 3,697 4,308 5,213 5,387 3,203 4,965 7,628 8,114 18,605 23,909Tax Provisions 1,450 1,550 1,564 170 920 1,350 2,365 2,538 4,734 7,173Net Profit 2,247 2,758 3,649 5,217 2,283 3,615 5,263 5,576 13,871 16,737% Change (Y-o-Y) 34.8 42.0 42.4 128.7 1.6 31.1 44.2 6.9 64.1 20.7Interest Exp./Interest Income (%) 64.6 70.7 69.0 68.9 68.0 65.6 67.7 68.6 68.4 67.5Other Income/Net Income (%) 22.6 30.4 33.8 30.3 21.5 22.5 25.5 25.9 29.5 24.0Cost to Income Ratio (%) 44.7 44.0 44.0 22.2 40.3 44.4 37.7 35.1 38.2 39.2Provisions/Operating Profits (%) 29.6 18.5 18.1 39.5 48.0 29.0 6.7 8.5 27.9 20.8Tax Rate (%) 39.2 36.0 30.0 3.2 28.7 27.2 31.0 31.3 25.4 30.0E: MOSL EstimatesAjinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) + 91 22 3982 5426/Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com) + 91 22 3982 541531 December 200888

Results PreviewQUARTER ENDING DECEMBER 2008CementBSE Sensex: 9,647 S&P CNX: 2,959 31 December 2008COMPANY NAMEACCAmbuja CementBirla CorporationGrasim IndustriesIndia CementsShree CementUltraTech CementSnapshot of 3QFY09 Cement Preview? Volumes expected to be higher by 7.3%? Domestic prices expected to be higher by 3.5% YoY & 0.6% QoQ? Export realizations decline by US$10/ton FOB for cement and US$5/ton FOB forclinker? Capacity utilization to fall to 85%, to levels witnessed in 3QFY05? Cost pressure receding, with benefit of lower energy cost, packing & freight to berealized by 4QFY09. Shree Cement and India Cement biggest beneficiaries, ACCand Birla Corp least beneficiaries.? 3QFY09 aggregate EBITDA margins to decline by 670bp YoY (~20bp QoQ). Marginsto improve over next 2-3 quarters, driven by cost savings.? FY10E earnings revised downwards by 4.5%-15% across companies, accept for10% upgrade in Shree Cement? Valuations attractive, but no triggers in sight. Impending supply would impact pricingand profitability.? Prefer companies with combination of volume growth, cost saving triggers, ungearedbalance sheet and attractive valuations. Grasim, Shree cement and Birla Corp areour top picks.CHANGE DISPATCHESPRICES(%) YOY QOQ YOY QOQ3QFY09 0.1 5.7 3.5 0.6FY08 8.2 12.7FY09 7.6 3.5CEMENT INDUSTRY DYNAMICS: DEMAND AND PRICE TRENDS(MT)Despatches (MT) Avg National Retail Prices (Rs/bag)49INR 231INR 20441INR 15538.540.9INR 14435.33331.7(Rs/bag)INR 239 25043.9210170251301QFY05 3QFY05 1QFY06 3QFY06 1QFY07 3QFY07 1QFY08 3QFY08 1QFY09 3QFY09Source: CMA/MOSLEXPECTED QUARTERLY PERFORMANCE SUMMARYRECO SALES EBITDA NET PROFIT(RS MILLION)DEC.08 CHG. (%) DEC.08 CHG. (%) DEC.08 CHG. (%)CementACC Neutral 18,226 5.9 3,884 -6.5 2,613 -15.3Ambuja Cements Neutral 15,968 8.7 4,210 -13.8 2,849 1.8Birla Corporation Buy 4,532 4.7 1,088 -27.8 734 -31.0Grasim Industries Buy 25,780 -2.0 5,639 -34.2 3,223 -41.5India Cements Buy 7,924 7.4 2,577 5.2 1,319 3.9Shree Cement Buy 6,395 22.1 1,841 -18.3 948 170.5UltraTech Cement Buy 16,054 16.2 3,710 -20.8 1,899 -32.1Sector Aggregate 94,879 6.6 22,948 -19.5 13,585 -19.5Jinesh K Gandhi (Jinesh@MotilalOswal.com); Tel +91 22 3982541631 December 200889

CementPricing: Cement prices remain stable3QFY09 Highlights? YoY Comparative: higher by 3.5%? QoQ Comparative: higher by 0.6%3QFY09: SUMMARY PRICING TRENDYOYPRICE CHANGE (%) *QOQNorth 1.9 0.0East 3.8 -2.0West 2.4 0.4South 8.0 3.1Central -2.7 -1.5National 3.5 0.6* adjusted for changes in prices for excise dutySource: Industry/Motilal Oswal SecuritiesPRICE TREND – NORTH (RS/BAG)250210170130163154(5.8%)(8.5%)FY05FY06222203 (9.4%)(24.5%)FY07FY08229 230 230 229(3.2%) (4.4%) (4.2%) (1.9%)1QFY092QFY093QFY09FY09PRICE TREND – EAST (RS/BAG)PRICE TREND – WEST (RS/BAG)250210233 234 230 231221(4.5%) (5.2%) (5.7%)(3.8%)(11.1%)199(20.6%)260220238 242 242 243 242(12.3%) (1.7%) (2.8%) (1.2%)(2.4%)212(29.3%)170130161165(8.2%) (2.5%)180140164148(10.8%)(10.2%)FY05FY06FY07FY081QFY092QFY093QFY09FY09FY05FY06FY07FY081QFY092QFY093QFY09FY09PRICE TREND – SOUTH (RS/BAG)PRICE TREND – CENTRAL (RS/BAG)280230180130265242 249 257258(18.0%) (6.6%) (8.9%) (5.6%) (8.0%)205(27.3%)154161(5.3%) (4.5%)250210170130215 215 214 212211194 (10.8%) -(1.4%)(0.7%) -(1.8%) -(2.7%)(32.0%)147136(9.5%) (8.1%)FY05FY06FY07FY081QFY092QFY093QFY09FY09FY05FY06FY07FY081QFY092QFY093QFY09FY09* Figure in bracket indicates YoY Change Source: CMA/MOSL31 December 200890

CementMOSL CEMENT UNIVERSE: 3QFY09 PERFORMANCE AT A GLANCEVOL (M TON) GROWTH (%) REAL (RS/BAG) CHANGE (%)3QFY09 YOY FY09YTD FY09E 3QFY09 YOY QOQ FY09EACC 5.1 1.6 3.4 3.4 179 10.6 -0.7 6.7Ambuja Cement 4.5 5.3 4.9 4.9 178 3.3 -0.4 5.4Grasim 3.9 8.3 2.3 3.4 172 7.2 0.0 7.4UltraTech 4.6 4.8 3.6 5.3 175 10.8 0.0 8.8Birla Corp 1.4 2.4 -3.3 -1.6 151 0.3 -1.9 1.3India Cement 2.1 3.8 2.2 4.2 183 8.0 1.7 9.0Shree Cement 2.1 -3.3 32.8 22.7 152 -5.9 -0.3 -0.9Industry 43.9 7.3 7.1 7.6 239 3.5 0.6 3.5* Adjusted for increase in excise Source: CMA, MOSLDomestic demand growth stable at 7%...Demand in the domestic market is expected to grow at 7-7.5% in 3QFY09, as against6.9% in 1HFY09. Demand growth in 3QFY09 would have been higher but for mutedgrowth in the northern (~3.4%) and western (~3.6%) regions. Cement demand, overall,has also been impacted by slowdown in the housing sector. While southern and easternregions continued to grow at 10%, the central region witnessed recovery in demand with11% growth.DOMESTIC DEMAND GROWTH STABLE AT ABOUT 8%PERIOD MT GROWTH (%)FY08 168 8.2FY09E 180 7.6FY09YTD 130 7.13QFY09 41 7.3(MT)49413311.9%31.7Despatches (MT) Growth (%)6.3%11.2%40.99.1%38.535.37.3%43.9(%)18%12%6%251QFY05 3QFY05 1QFY06 3QFY06 1QFY070%3QFY07 1QFY08 3QFY08 1QFY09 3QFY09Source: CMA/MOSLCapacity utilization to fall to 85%Capacity utilization for 3QFY09 is estimated to decline to 85% (v/s 95% in 3QFY08), onthe back of 31MT of capacity addition during the last one year. Cement industry’s capacityutilization at 85% would continue to be lower for 3QFY09 and is expected to be at utilizationlevels of 3QFY05. Capacity utilization for the industry is expected to ease from the optimumlevel of ~95% to ~86% in FY09E and to 73% in FY10E, on the back of 80-100MT capacityaddition over next 2-3 years.31 December 200891

CementCAPACITY UTILIZATION: NEW CAPACITIES EASING THE PRESSURECAP UTIL %110%FY08 98FY09E 87FY10E 73FY09YTD 883QFY09 85100%90%80%80%84%90%94%95%85%70%1QFY044QFY043QFY052QFY061QFY074QFY073QFY082QFY09Source: CMA/MOSLDomestic cement prices remain stable …Cement prices are expected to remain stable, with 0.6% QoQ increase (adjusted forexcise duty reduction). While prices in the south were higher on a QoQ basis by 3%,prices in the western and northern areas were stable; those in the central and easternareas declined. Cement prices are expected to come under pressure, as new capacitiesresult in imbalance.TREND IN CEMENT PRICES (NATIONAL AVERAGE, RS/BAG)255215204(27.5%)230(12.7%)235 238 239 238(3.5%) (4.7%) (3.2%) (3.5%)175151(8.1%)160(6.0%)135FY05FY06FY07FY081QFY092QFY093QFY09FY09* Figure in bracket indicates YoY Change Source: CMA/MOSLWhile cement price reduction was imminent, it is now cushioned by reduction of exciseduty. The cement industry has partly passed on benefit of reduction in excise duty by 4%,by reducing cement prices in range of Rs5-8/bag across regions. The reduction in exciseduty has helped cement players reduce cement prices without impacting their realizationand profitability.31 December 200892

Cement... but export realizations decline …Export realizations for cement have declined by US$10/ton f.o.b. to about US$53-55/ton,whereas clinker realizations have declined by US$5/ton f.o.b. to about US$48-50/ton.However, demand from the export market remains stable. Decline in export realizationswould impact UltraTech Cement and Ambuja Cement the most.… cost push receding, with full benefit to be realized only in 4QFY09Cost push in the form of energy prices and freight costs, had impacted industry profitabilityin last few quarters. Prices of imported coal/pet coke have declined by ~60% from thepeak, whereas crude prices have also declined by ~70% resulting in Rs2/liter decline indiesel prices. The benefit of moderation in imported coal prices would be only reflected in4QFY09 owing to inventories/contracts.TREND IN IMPORTED COAL PRICES – CIF (US$/TON)240205180164PERIOD US$/TON CHANGE (%)FY07 68 0.0FY08 110 62.8FY09YTD 157 52.33QFY09 101 -20.6120606775 80101127 13210103QFY07 4QFY07 1QFY08 2QFY08 3QFY08 4QFY08 1QFY09 2QFY09 3QFY09Change (%) 28.4 11.4 29.2 54.2 88.5 74.9 155.3 62.4 -20.6Source: BloombergAlso, freight cost and packing cost are expected to moderate in line with moderation incrude oil. Our estimates now factor in lower coal prices at the current level of US$80/tonand lower packaging cost. We have not revised our freight cost estimates, as we estimatethe benefit of lower diesel price to get negated by the 7-8% increase in rail freight. Overall,we expect cost to moderate by Rs2-15/bag, driven by energy mix and rail-road mix; ShreeCement saving the most (~Rs15/bag) and Birla Corp the least (~Rs2/bag).Revenue growth driven by higher prices, stable volume growthWe expect MOSL Cement universe to report around 4.7% volume growth, as the tier-1companies continue to operate at optimum capacity. Improvement in realizations (~Rs206/ton YoY and Rs11/ton QoQ decline) would be negated by higher cost push, thereby resultingin EBITDA decline of Rs179/ton YoY (and Rs26/ton QoQ) to Rs891/ton.31 December 200893

CementTREND IN 3QFY09 KEY OPERATING PARAMETERSVOLUME (M TON) REALIZATION (RS/BAG) EBITDA (RS/BAG)3QFY09 YOY QOQ 3QFY09 YOY QOQ 3QFY09 YOY QOQ(%) (%) (RS) (RS) (RS) (RS)ACC 5.1 1.6 4.9 179.0 17.1 -1.2 38.0 0.5 -1.3Ambuja Cement 4.5 5.3 14.4 178.0 5.7 -0.8 47.0 -10.4 -5.2Grasim 3.9 2.4 4.1 172.0 11.6 0.0 49.0 -11.0 -1.3UltraTech 4.6 4.8 15.0 175.0 17.1 0.0 41.0 -13.1 3.3Birla Corp 1.4 3.8 24.1 151.0 0.4 -3.0 40.0 -19.7 0.5India Cement 2.1 -3.3 -13.1 183.0 13.5 3.0 61.0 5.0 1.3Shree Cement 2.1 29.9 4.1 152.0 -9.6 -0.5 44.0 -25.8 -1.5Kesoram Ind 1.3 8.3 0.5 196.0 13.1 3.0 52.0 -14.8 -2.0Sector Aggregate 23.6 4.7 7.2 173.0 10.3 -0.5 45.0 -8.9 -1.2Source: CMA/MOSLOverall, we expect our cement universe’s revenue to grow by 10% YoY, with EBITDAmargin declining by 670bp (~20bp QoQ) to 24.7%, translating into 9% YoY decline in PAT.TREND IN 3QFY09 KEY FINANCIAL PARAMETERSNET SALES (RS M) EBITDA MARGIN (%) NET PROFIT (RS M)3QFY09 YOY QOQ 3QFY09 YOY QOQ 3QFY09 YOY QOQ(%) (%) (BP) (BP) (%) (%)ACC 18,226 5.9 4.2 21.3 -190 -60 2,613 -15.3 6.2Ambuja Cement 15,968 8.7 13.9 26.4 -690 -280 2,849 1.8 13.9Grasim* 16,461 10.1 3.5 23.4 -750 -40 3,223 -41.5 -23.2UltraTech 16,054 16.2 15 23.1 -1,080 190 1,899 -32.1 15.7Birla Corp 4,532 4.7 21.9 24 -1,080 310 734 -31 23India Cement 7,924 7.4 -16.2 32.5 -70 180 1,319 3.9 -14.7Shree Cement 6,395 22.1 1.6 28.8 -1,420 -30 948 170.5 -17.7Kesoram Ind 5,028 26.3 -990 -140 853Sector Aggregate* 85,561 10.2 5.8 24.7 -670 -20 10,362 -8.8 4.7* Grasim’s sales and EBITDA Margin for cement business only; Sector PAT excl GrasimSource: CMA/MOSLRevising estimatesWe are revising our estimates downward for all cement companies under our coverage,except for Shree Cement to factor in lower volumes, lower realizations, cost moderationand lower other income. However, Shree Cement would gain significantly due to moderationin pet coke price which would dilute impact of lower volumes and lower realization.REVISED ESTIMATES (RS)FY09EFY10EREV OLD CHG (%) REV OLD CHG (%)ACC 57.7 58.2 -0.9 39.7 41.7 -4.8Ambuja Cement 7.7 7.6 1.3 5.8 6.1 -5.3Grasim 237.0 250.0 -5.2 172.3 202.0 -14.7UltraTech 69.0 70.5 -2.1 60.7 65.4 -7.2Birla Corp 40.4 43.0 -6.0 31.5 33.0 -4.5India Cement 22.5 24.7 -8.8 18.9 21.7 -13.0Shree Cement 130.1 123.5 5.3 104.6 94.7 10.4Source: CMA/MOSL31 December 200894

CementValuation and viewWhile volume growth is expected to remain stable, new capacities (~100MT in FY08-11E) would result in excessive supply. However, impact of these new capacities on thedemand-supply equilibrium is expected only by 2QCY09.In the interim, margins are expectedto improve from 2QFY09 levels, as prices remain stable and energy costs moderate. Theexcess supply situation is expected to continue at least until FY11, curtailing pricing powerfor the industry.STOCK PERFORMANCEABSOLUTE RELATIVERATING 6M 12M 3QFY09 FY09YTD 6M 12M 3QFY09 FY09YTDACC Neutral -4.9 -53.1 -23.7 -4.9 20.6 -0.2 2.4 -3.5Ambuja Neutral -4.0 -52.7 -11.1 -4.0 21.5 0.2 15.0 -3.6Grasim Buy -30.4 -67.4 -31.0 -30.4 -4.8 -14.6 -4.9 -14.9UltraTech Buy -26.2 -61.2 -26.0 -26.2 -0.6 -8.3 0.1 -11.5Birla Corp Buy -19.5 -61.2 3.5 -19.5 6.1 -8.3 29.6 3.6India Cement Buy -19.4 -68.2 -20.5 -19.4 6.2 -15.3 5.6 -9.2Shree Cement Buy -15.1 -66.5 -9.6 -15.1 10.5 -13.6 16.5 -19.2Source: CMA/MOSLIndustry valuations are attractive, despite recent outperformance of cement stock, asasset valuations are below the replacement cost of US$100/ton, which would protectdownside. However, upside seems limited from current levels, especially with impendingexcess supply situation and consequent decline in profitability. We prefer companies thatare ahead of the curve in adding capacity, along with strong cost saving possibilities.Among large cap stocks, Grasim remains our top pick, while we prefer Birla Corp. andShree Cement among mid-caps.VALUATIONS – AT STEEP DISCOUNT TO REPLACEMENT COSTEV (US$/Ton)$120$100$80$60$40$20ACC($63, 14%)Grasim($50, 13%)Ambuja($82, 16%)India Cement($49, 16%)Birla Corp($10, 16%)UltraTech($55, 20%)Shree Cement($38, 22%)$010% 12% 14% 16% 18% 20% 22% 24%RoE (%)Replacement Cost at US$100/tonSource: CMA/MOSL31 December 200895

CementStock performance and valuationsSTOCK PERFORMANCE (%)ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARCementACC -22 -53 3 -1 -1 7Ambuja Cement -11 -53 14 0 10 8Birla Corporation 3 -61 28 -8 24 0Grasim Industries -28 -67 -3 -14 -7 -6India Cement -21 -69 4 -16 0 -8Shree Cement -10 -66 15 -14 11 -6UltraTech Cement -27 -62 -2 -10 -7 -2RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)110SensexMOSL Cement Index105MOSL Cement IndexSensex95858065654550Sep-08 Oct-08 Nov-08 Dec-0825Dec-07 Mar-08 Jun-08 Sep-08 Dec-08CMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10ECementACC 478 Neutral 68.1 57.7 39.7 7.0 8.3 12.0 4.1 4.2 6.8 30.8 22.1 13.9Ambuja Cements 70 Neutral 8.6 7.7 5.8 8.1 9.1 12.1 4.3 4.9 6.6 32.2 23.2 15.8Birla Corporation 129 Buy 51.1 40.4 31.5 2.5 3.2 4.1 1.0 1.2 1.1 39.1 24.4 16.5Grasim Industries 1,218 Buy 293.9 237.0 172.3 4.1 5.1 7.1 2.5 3.0 3.1 34.3 21.6 13.6India Cements 97 Buy 24.7 22.5 18.9 3.9 4.3 5.2 3.8 3.2 3.3 34.0 21.7 15.5Shree Cement 460 Buy 82.6 130.1 104.6 5.6 3.5 4.4 2.9 2.5 2.4 51.1 51.2 28.7UltraTech Cement 383 Buy 80.9 69.0 60.7 4.7 5.6 6.3 3.6 3.7 3.1 45.2 27.8 19.7Sector Aggregate 5.3 6.1 8.0 3.2 3.5 3.9 33.0 22.9 15.331 December 200896

Results PreviewSECTOR: CEMENTACCSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,95931 December 2008BLOOMBERGACC INREUTERS CODEACC.BOEquity Shares (m) 187.952-Week Range 1,098/3691,6,12 Rel. Perf. (%) 12/20/-1M.Cap. (Rs b) 89.8M.Cap. (US$ b) 1.8QUARTERLY PERFORMANCE (STANDALONE)31 December 2008Previous Recommendation: NeutralYEAR NET SALES PAT EPS* EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA12/06A 57,170 11,094 59.0 161.7 8.1 2.9 35.3 31.3 1.5 5.412/07A 68,780 12,798 68.1 15.4 7.0 2.2 30.8 32.6 1.1 4.112/08E 71,239 10,838 57.7 -15.3 8.3 1.8 22.1 24.5 1.0 4.212/09E 73,820 7,467 39.7 -31.1 12.0 1.7 13.9 13.9 1.1 6.8* Fully Diluted EPS(RS MILLION)Y/E DECEMBER CY07 CY08 CY07 CY08E1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QENeutralCement Sales (m ton) 4.93 5.34 4.68 5.02 5.40 5.29 4.86 5.10 20.0 20.6YoY Change (%) -2.4 15.3 9.9 3.5 9.5 -0.9 3.8 1.6 6.1 3.4Cement Realization 3,152 3,264 3,400 3,233 3,271 3,375 3,599 3,575 3,260 3,450YoY Change (%) 25.9 11.9 12.2 3.4 3.8 3.4 5.9 10.6 13.4 5.8QoQ Change (%) 0.8 3.5 4.2 -4.9 1.2 3.2 6.6 -0.7Net Sales 16,349 18,425 16,788 17,218 17,663 17,857 17,492 18,226 68,780 71,239YoY Change (%) 22.3 28.7 23.3 8.1 8.0 -3.1 4.2 5.9 20.3 3.6EBITDA 5,092 5,442 4,486 4,154 4,706 4,136 3,828 3,884 19,174 16,553Margins (%) 31.1 29.5 26.7 24.1 26.6 23.2 21.9 21.3 27.9 23.2Depreciation 744 715 809 782 714 724 736 761 3,051 2,936Interest 170 109 256 204 56 108 116 109 739 388Other Income 535 435 549 533 656 472 661 719 1,787 2,500PBT before EO Item 4,713 5,053 3,969 3,701 4,593 3,776 3,636 3,733 17,172 15,729EO Income/(Expense) 77 0 39 2,015 366 123 554 0 2,131 489PBT after EO Item 4,790 5,053 4,008 5,716 4,958 3,899 4,190 3,733 19,303 16,218Tax 1,215 1,576 1,172 954 1,383 1,185 1,356 1,121 4,917 5,044Rate (%) 25.4 31.2 29.2 16.7 27.9 30.4 32.4 30.0 25.5 31.1Reported PAT 3,576 3,477 2,836 4,762 3,575 2,714 2,834 2,613 14,386 11,174Adjusted PAT 3,518 3,477 2,808 3,083 3,312 2,629 2,460 2,613 12,798 10,838Margins (%) 21.5 18.9 16.7 17.9 18.7 14.7 14.1 14.3 18.6 15.2YoY Change (%) 54.3 14.4 25.0 -11.0 -5.9 -24.4 -12.4 -15.3 15.4 -15.3E: MOSL Estimates; Note: The quarterly results are not strictly comparable due to demerger of RMC business from January 2008.Jinesh K Gandhi (Jinesh@MotilalOswal.com); Tel +91 22 39825416Rs478? ACC’s 4QCY08 results are not comparable as it has divested RMC business into a separate subsidiary. Dispatchesduring 4QCY08 are expected to have muted growth at 1.6% to 5.1mt, as it continues to operate at optimal rate.Average realizations are expected to decline marginally by 0.7% QoQ to Rs3,575/ton.? Net sales are expected to grow just by 5.9% YoY to Rs18.2b, due to divestment of RMC business. Cement businessEBITDA margin is expected to decline by 190bp to 21.3%, as fixed costs are expected to remain high on account ofcapitalization of the expenses of implementing SAP Phase II. As a result, EBITDA is expected to decline 6.5% toRs3.9b. Higher tax provisioning at 30% (v/s 16.7% in 4QCY07) would further impact PAT decline of 15% to Rs2.6b.? ACC, with about 85% dependence on domestic coal, would benefit marginally by moderation in imported coal prices.We estimate Rs3-3.5/bag moderation in energy cost and packaging cost from 1QCY09 onward.? We have marginally revised our earnings estimate downward for CY08 by 1% to Rs57.7 and for CY09 by 4.8% toRs39.7 to factor in lower volumes, cost moderation and lower interest income. Valuations at 8.3x CY08E EPS and4.2x CY08E EV/EBITDA appear rich. Maintain Neutral.97

Results PreviewSECTOR: CEMENTAmbuja CementSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGACEM INREUTERS CODEGACM.BO31 December 2008Previous Recommendation: NeutralNeutralRs70Equity Shares (m) 1,522.452-Week Range 152/431,6,12 Rel. Perf. (%) 27/20/0M.Cap. (Rs b) 106.1M.Cap. (US$ b) 2.2YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA12/06A 48,479 13,401 8.8 114.7 7.9 3.0 47.4 43.3 1.9 5.212/07A 56,314 13,078 8.6 -2.8 8.1 2.3 32.2 43.0 1.5 4.312/08E 62,233 11,695 7.7 -10.6 9.1 1.9 23.2 32.4 1.4 4.912/09E 61,053 8,787 5.8 -24.9 12.1 1.9 15.8 21.7 1.6 6.6? Ambuja Cement’s 4QCY08 sales are expected to be at Rs16b (up ~9% YoY). Dispatches are expected to be 4.5mt(growth of ~5% YoY), whereas average realizations are expected to be at Rs3,561/ton (up ~3% YoY and 0.4% QoQdecline).? EBITDA margin is expected to decline 690bp YoY to 26.4%, as the full benefit of lower imported coal prices wouldonly be reflected in 1QCY09. Recurring PAT is estimated to remain muted at Rs2.85b (~1.8% growth).? Ambuja would benefit from lower imported coal prices, as it imports about 33% of its coal requirement. We estimatecost savings of about Rs6-6.5/bag, including savings in packaging cost.? We are revising our estimates downward by 5.3% for CY09 to Rs5.8 to factor in lower volumes, pressure onrealizations and cost moderation. Valuations at 9.1x CY08E earnings and 4.9x CY08E EV/EBITDA are a fairreflection of business fundamentals. Maintain Neutral.QUARTERLY PERFORMANCE (STANDALONE)(RS MILLION)Y/E DECEMBER CY07 CY08 CY07 CY08E1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QESales Volume (m ton) 4.34 4.39 3.77 4.26 4.80 4.38 3.92 4.48 16.76 17.58YoY Change (%) 3.8 1.7 3.0 3.4 10.6 -0.3 4.0 5.3 2.8 4.9Realization (Rs/ton) 3,271 3,305 3,428 3,448 3,448 3,588 3,576 3,561 3,360 3,540YoY Change (%) 27.3 8.6 10.9 6.9 5.4 8.6 4.3 3.3 13.0 100.1QoQ Change (%) 1.4 1.0 3.7 0.6 0.0 4.1 -0.3 -0.4 64.2 19.0Net Sales 14,195 14,507 12,924 14,687 16,549 15,698 14,019 15,968 56,314 62,233YoY Change (%) 32.2 10.4 14.3 10.5 16.6 8.2 8.5 8.7 16.2 258.6EBITDA 5,659 5,479 4,429 4,884 5,160 4,743 4,091 4,210 20,451 18,204Margins (%) 39.9 37.8 34.3 33.3 31.2 30.2 29.2 26.4 36.3 29.3Depreciation 598 583 584 598 618 616 654 659 2,363 2,547Interest 119 94 56 490 57 57 59 64 759 236Other Income 330 765 298 542 406 350 333 612 1,935 1,700PBT before EO Item 5,272 5,568 4,088 4,338 4,890 4,420 3,711 4,099 19,265 17,120Extraordinary Inc/(Exp) 2,408 5,747 -270 -26 -59 3,142 0 0 7,859 3,083PBT after EO Exp/(Inc) 7,679 11,314 3,818 4,312 4,832 7,562 3,711 4,099 27,124 20,204Tax 2,017 2,764 1,117 3,535 1,570 1,791 1,210 1,250 9,433 5,821Rate (%) 26.3 24.4 29.2 82.0 32.5 23.7 32.6 30.5 34.8 28.8Reported Profit 5,663 8,550 2,701 777 3,262 5,770 2,501 2,849 17,691 14,382Adj PAT 3,582 3,808 2,910 2,797 3,302 3,043 2,501 2,849 13,078 11,695YoY Change (%) 33.5 16.3 11.2 -17.2 -7.8 -20.1 -14.0 1.8 -2.4 -10.6E: MOSL EstimatesJinesh K Gandhi (Jinesh@MotilalOswal.com); Tel +91 22 3982541631 December 200898

Results PreviewSECTOR: CEMENTBirla CorporationSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGBJUT INREUTERS CODEBRLC.BO31 December 2008Previous Recommendation: BuyBuyRs129Equity Shares (m) 77.052-Week Range 344/711,6,12 Rel. Perf. (%) 19/6/-8M.Cap. (Rs b) 9.9M.Cap. (US$ b) 0.2YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 15,669 3,262 42.4 37.9 3.0 1.5 49.0 46.9 0.5 1.703/08A 17,248 3,932 51.1 20.5 2.5 1.0 39.1 42.5 0.3 1.003/09E 17,213 3,113 40.4 -20.8 3.2 0.8 24.4 28.7 0.3 1.203/10E 17,594 2,426 31.5 -22.1 4.1 0.7 16.5 20.7 0.2 1.1? During 3QFY09, Birla Corporation’s revenue is expected to grow by 4.7% to Rs4.5b. Cement realizations is likely todecline by 2% QoQ to Rs3,023/ton, whereas volumes are expected to grow by 3.8% to 1.38MT.? However, higher energy cost (due to lower linkage) and higher freight cost would result in 10.8pp decline in EBITDAmargin to 24% and translate into 28% decline in EBITDA to Rs1.09b. As a result, we estimate 31% decline in PATto Rs734m.? Given 100% dependence on imported coal, Birla Corp would not benefit meaningfully from moderation in importedcoal prices. Overall, we estimate Rs2/bag savings in cost in energy and packaging cost.? We are revising our estimates downward by 6% for FY09 to Rs40.4 and by 4.5% for FY10 to Rs31.5 to factor inlower volumes, pressure on realizations and cost moderation. Its EV/ton (at 7.5mt capacity) works out to US$15/ton,which is at a discount to comparable peers. We believe the discount is not justified and valuations, based on earningsas well as replacement cost, are compelling. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QECement Sales (m ton) 1.28 1.20 1.33 1.48 1.19 1.11 1.38 1.52 5.28 5.20YoY Change (%) 2.9 -4.2 0.8 3.8 -7.1 -7.2 3.8 2.8 0.9 -1.6Cement Realization 2,972 3,064 3,016 2,963 3,096 3,083 3,023 2,983 3,001 3,041YoY Change (%) 15.8 16.9 7.9 1.6 4.2 0.6 0.3 0.7 9.8 1.3QoQ Change (%) 1.9 3.1 -1.6 -1.7 4.5 -0.4 -1.9 -1.3Net Sales 4,093 3,940 4,329 4,887 3,959 3,718 4,532 5,004 17,248 17,213YoY Change (%) 17.3 8.0 5.8 10.1 -3.3 -5.6 4.7 2.4 10.1 -0.2Total Expenditure 2,655 2,440 2,823 3,575 2,816 2,941 3,444 3,722 11,493 12,924EBITDA 1,438 1,500 1,506 1,312 1,143 777 1,088 1,282 5,755 4,290Margins (%) 35.1 38.1 34.8 26.8 28.9 20.9 24.0 25.6 33.4 24.9Depreciation 103 103 102 107 98 100 110 117 419 425Interest 50 53 54 54 50 37 45 45 211 177Other Income 88 98 97 101 235 121 80 85 383 520Profit before Tax 1,372 1,441 1,447 1,253 1,230 760 1,013 1,205 5,508 4,207Tax 398 409 382 387 311 163 278 341 1,576 1,094Rate (%) 29.0 28.4 26.4 30.9 25.3 21.5 27.5 28.3 28.6 26.0Adjusted PAT 975 1,031 1,065 866 918 597 734 864 3,932 3,113Margins (%) 23.8 26.2 24.6 17.7 23.2 16.1 16.2 17.3 22.8 18.1YoY Change (%) 56.3 52.7 11.9 -14.5 -5.8 -42.1 -31.0 -0.2 20.5 -20.8E: MOSL EstimatesJinesh K Gandhi (Jinesh@MotilalOswal.com); Tel +91 22 3982541631 December 200899

Results PreviewSECTOR: CEMENTGrasim IndustriesSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGGRASIM INREUTERS CODEGRAS.BO31 December 2008Previous Recommendation: BuyBuyRs1,218Equity Shares (m) 91.752-Week Range 3,830/8311,6,12 Rel. Perf. (%) 31/-6/-14M.Cap. (Rs b) 111.7M.Cap. (US$ b) 2.3YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END* (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 140,695 19,674 214.6 89.6 5.7 1.7 34.5 31.1 0.9 3.103/08A 169,739 26,951 293.9 37.0 4.1 1.2 34.3 31.1 1.0 3.103/09E 177,180 21,727 237.0 -19.4 5.1 1.0 21.6 20.4 1.0 3.903/10E 178,690 15,799 172.3 -27.3 7.1 0.9 13.6 14.7 0.9 4.1* Consolidated? Grasim (standalone) is estimated to post sales decline of 2% YoY to Rs25.8b in 3QFY09, impacted by severeslowdown in VSF business. This coupled with severe cost push would lead to margin declining by 10.7bp to 21.9%and PAT de-growth of 42% to Rs3.2b.? The cement volumes are expected to grow just by 2.4% YoY to 3.85mt, as the new capacity is not yet fully operational.Realizations expected to remain flat QoQ (~7.2% YoY improvement) to Rs3,446/ton. However, cement division’soperating margins are expected to decline by 750bp YoY to 23.4%, as benefit of lower energy cost would only berealized in 4QFY09.? VSF volumes are likely to decline by 25% YoY and realizations are likely to decline by 11% YoY (~4.7% QoQdecline) to Rs97/kg. Further, full benefit of lower sulphur prices would only be reflected in 4QFY09, resulting in22.2pp YoY decline (~210bp QoQ) in margins to 19.3%.? Grasim would benefit from lower imported coal cost/pet coke cost in its cement business, whereas its VSF businesswould benefit from lower sulphur prices. As a result, we estimate Rs5-6/bag savings in cement cost and ~Rs10/kgsavings in VSF cost.? We our revising our FY09E earnings estimate downward by 5.4% to Rs237 and 14.6% decline to Rs172.7, to factorin for lower volumes in both cement and VSF business as well as moderation in cost and downgrade in Idea Cellular.Valuations at 5.1x P/E FY09E and 3.9x FY09E EV/EBITDA (consolidated) appears reasonable. Maintain Buy.QUARTERLY PERFORMANCE (STANDALONE)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 24,448 24,776 26,299 27,424 25,923 26,853 25,780 26,859 102,781 105,414YoY Change (%) 29.2 23.2 15.3 10.8 6.0 8.4 -2.0 -2.1 18.9 2.6EBITDA 7,921 7,852 8,563 6,623 7,520 5,792 5,639 6,847 31,097 25,797Margins (%) 32.4 31.7 32.6 24.2 29.0 21.6 21.9 25.5 30.3 24.5Depreciation 850 875 865 942 1,050 1,069 1,299 1,697 3,533 5,114Interest 285 280 234 272 305 288 425 545 1,070 1,563Other Income 677 783 650 1,187 822 997 500 681 3,148 3,000PBT before EO Items 7,464 7,480 8,114 6,597 6,988 5,431 4,415 5,285 29,642 22,120Extraordinary Inc/(Exp) 0 0 39 2,257 0 0 0 0 2,307 0PBT after EO Items 7,464 7,480 8,153 8,853 6,988 5,431 4,415 5,285 31,949 22,120Tax 2,347 2,478 2,616 2,182 1,846 1,236 1,192 1,421 9,623 5,696Rate (%) 31.4 33.1 32.1 24.7 26.4 22.8 27.0 26.9 30.1 25.8Reported PAT 5,117 5,002 5,538 6,671 5,142 4,195 3,223 3,864 22,326 16,424Adj. PAT 5,117 5,002 5,511 4,453 5,142 4,195 3,223 3,568 20,071 16,424YoY Change (%) 64.0 48.0 33.9 -0.8 0.5 -16.1 -41.5 -19.9 32.9 -18.2E: MOSL Estimates; Quarterly results do not add-up to full year results due to restatementJinesh K Gandhi (Jinesh@MotilalOswal.com); Tel +91 22 3982541631 December 2008100

Results PreviewSECTOR: CEMENTIndia CementsSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGICEM INREUTERS CODEICMN.BO31 December 2008Previous Recommendation: BuyBuyRs97Equity Shares (m) 281.952-Week Range 316/691,6,12 Rel. Perf. (%) 6/-1/-16M.Cap. (Rs b) 27.5M.Cap. (US$ b) 0.6YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 22,552 4,788 19.0 891.5 5.1 1.8 43.0 22.0 1.8 5.703/08A 30,442 6,739 24.7 29.7 3.9 1.1 34.0 25.6 1.3 3.603/09E 35,148 6,150 22.5 -8.7 4.3 0.9 21.7 22.3 1.0 3.103/10E 37,465 5,147 18.9 -16.3 5.2 0.8 15.5 17.5 0.9 3.1? India Cement is expected to report 7.4% YoY sales growth to Rs7.9b, driven by 8% YoY (~1.7% QoQ) higherrealizations to Rs3,665/ton and 3.3% volume de-growth to 2.11MT.? Higher realizations would dilute impact of higher cost (energy and freight cost), translating into EBITDA margindeclining by 70bp YoY to 32.5%, with 5% decline in EBITDA to Rs2.6b. India Cement would only benefit from4QFY09 for lower imported coal prices, translating into Rs5/bag savings in cost (including packing cost). Costsavings for the company would be lower as it wouldn’t gain on freight on imported coal due to ships which it owns.Margins would improve 180bp QoQ as last quarter had dry docking and IPL related expenditure.? Higher depreciation (up 69%) would restrict PAT growth to 4% to Rs1.3b.? We are revising our earnings estimates downward for FY09 by 8.8% to Rs22.5 and FY10 by 13% to Rs18.9 to factorin lower volumes and cost moderation. At current valuations of 4.3x FY09E EPS and 3.1x FY09E EBITDA, valuationsappear attractive. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales Dispatches (m ton) 2.31 2.27 2.18 2.46 2.37 2.43 2.11 2.70 9.22 9.60YoY Change (%) 24.5 20.9 25.5 - 2.7 6.9 -3.3 9.8 9.4 4.1Realization (Rs/ton) 3,033 3,339 3,395 3,373 3,440 3,605 3,665 3,604 3,280 3,577YoY Change (%) 16.4 22.2 25.0 21.7 13.4 8.0 8.0 6.9 23.2 9.1QoQ Change (%) 9.4 10.1 1.7 -0.7 2.0 4.8 1.7 -1.7Net Sales 7,012 7,612 7,379 8,440 8,375 9,455 7,924 9,395 30,443 35,148YoY Change (%) 44.5 47.4 56.2 8.0 19.4 24.2 7.4 11.3 35.0 15.5Total Expenditure 4,369 4,539 4,930 5,811 5,393 6,554 5,347 6,380 19,648 23,675EBITDA 2,643 3,074 2,449 2,629 2,981 2,901 2,577 3,015 10,794 11,474Margins (%) 37.7 40.4 33.2 31.1 35.6 30.7 32.5 32.1 35.5 32.6Depreciation 275 303 311 390 490 498 525 541 1,279 2,054Interest 226 283 273 229 230 248 250 284 1,099 1,012Other Income 10 11 30 325 132 91 75 273 511 570PBT before EO Expense 2,151 2,499 1,895 2,335 2,392 2,246 1,877 2,463 8,928 8,978Extra-Ord Expense -88 -47 0 481 218 296 0 0 481 513PBT 2,239 2,546 1,895 1,854 2,175 1,950 1,877 2,463 8,446 8,465Tax 317 320 624 810 754 608 557 748 2,071 2,667Rate (%) 14.2 12.6 32.9 43.7 34.6 31.2 29.7 30.4 24.5 31.5Reported PAT 1,921 2,227 1,271 1,044 1,421 1,343 1,319 1,715 6,375 5,799Adj PAT 1,846 2,185 1,271 1,408 1,564 1,546 1,319 1,715 6,739 6,150YoY Change (%) 64.0 86.2 59.3 -16.8 -15.3 -29.2 3.9 21.8 40.7 -8.7Margins (%) 26.3 28.7 17.2 16.7 18.7 16.4 16.7 18.3 22.1 17.5E: MOSL EstimatesJinesh K Gandhi (Jinesh@MotilalOswal.com); Tel +91 22 3982541631 December 2008101

Results PreviewSECTOR: CEMENTShree CementSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGSRCM INREUTERS CODESHCM.BO31 December 2008Previous Recommendation: BuyBuyRs460Equity Shares (m) 34.852-Week Range 1,405/3301,6,12 Rel. Perf. (%) 23/6/-14M.Cap. (Rs b) 16.0M.Cap. (US$ b) 0.3YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 13,680 1,571 45.1 888.0 10.2 3.5 41.8 17.3 1.6 3.703/08A 20,659 2,879 82.6 83.2 5.6 2.4 51.1 27.0 1.2 2.903/09E 25,110 4,531 130.1 57.4 3.5 1.5 51.2 33.0 0.8 2.503/10E 24,650 3,642 104.6 -19.6 4.4 1.1 28.7 26.8 0.7 2.4? Sales in 3QFY09 are expected to grow by 22% YoY to Rs6.4b driven by volume growth of 30% YoY to 2.1mt, whilerealizations are expected to remain flat QoQ (~6% YoY decline due to higher clinker sales) to Rs3,045/ton.? Significant increase in petcoke prices, coupled with increase in freight rates, would translate in EBITDA margindecline of 14.2pp at 28.8% and EBITDA to Rs1.8b (~ down 14%). Shree Cement would benefit from about 50%drop in pet coke prices, with savings of about Rs10-12/bag which would be fully reflected in 4QFY09.? Lower depreciation (by 71%) due to accelerated depreciation on new capacities in 3QFY08 would boost PAT toRs948m (up 170%).? Shree Cement, with market concentration in North, is vulnerable to slowing demand in north region coupled withimports from Punjab and significant capacity addition. We revise our earnings estimates upwards by 5.3% to Rs130for FY09E and 10.4% for FY10E to Rs104.6. The stock trades at very attractive valuations of 3.5x FY09E EPS and2.5x FY09E EBITDA. Maintain Buy.QUARTERLY PERFORMANCEJinesh K Gandhi (Jinesh@MotilalOswal.com); Tel +91 22 39825416(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales Dispatches (m ton) 1.44 1.49 1.62 2.06 1.92 2.02 2.10 2.06 6.60 8.10YoY Change (%) 24.0 34.5 24.9 61.1 33.7 35.1 29.9 0.4 33.6 22.7Realization (Rs/ton) 3,073 3,188 3,238 3,162 3,201 3,055 3,045 3,042 3,129 3,100YoY Change (%) 15.3 12.0 15.0 6.7 4.2 -4.2 -5.9 -3.8 13.1 -0.9QoQ Change (%) 3.7 3.7 1.6 -2.4 1.2 -4.6 -0.3 -0.1 -7.3 -26.1Net Sales 4,410 4,760 5,236 6,501 6,143 6,292 6,395 6,280 20,659 25,110YoY Change (%) 43.0 50.7 43.6 71.9 39.3 32.2 22.1 -3.4 51.0 21.5EBITDA 1,823 2,011 2,253 2,537 2,106 1,828 1,841 2,163 8,624 7,936Margins (%) 41.3 42.3 43.0 39.0 34.3 29.0 28.8 34.4 41.7 31.6Depreciation 358 688 1,875 1,867 461 537 540 543 4,788 2,081Interest 39 85 127 246 171 167 170 168 497 675Other Income 126 291 170 146 118 336 150 146 733 750PBT before EO Exp 1,552 1,530 420 569 1,592 1,460 1,281 1,598 4,072 5,931Extra-Ord Expense 0 0 0 0 76 97 80 80 389 333PBT 1,552 1,530 420 569 1,516 1,363 1,201 1,518 3,683 5,598Tax 383 468 70 158 407 288 312 392 1,079 1,399Rate (%) 24.7 30.6 16.7 27.8 26.9 21.1 26.0 25.8 29.3 25.0Reported PAT 1,169 1,062 350 411 1,109 1,075 889 1,126 2,604 4,198Adj PAT 1,169 1,062 350 411 1,164 1,151 948 1,185 2,879 4,448YoY Change (%) 29.4 36.7 -66.4 920.0 -0.4 8.4 170.5 188.5 81.3 54.5Margins (%) 26.5 22.3 6.7 6.3 19.0 18.3 14.8 18.9 13.9 17.7E:MOSL Estimates; Quarterly results do not add up with FY results as it provides addl. depreciation and deferred tax at the end of year31 December 2008102

Results PreviewSECTOR: CEMENTUltraTech CementSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGUTCEM INREUTERS CODEULTC.BO31 December 2008Previous Recommendation: BuyBuyRs383Equity Shares (m) 124.552-Week Range 1,049/2501,6,12 Rel. Perf. (%) 35/-1/-10M.Cap. (Rs b) 47.7M.Cap. (US$ b) 1.0YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 49,105 7,823 62.8 240.5 6.1 2.7 55.8 43.0 1.2 4.103/08A 55,092 10,076 80.9 28.8 4.7 1.8 45.2 40.7 1.1 3.603/09E 63,575 8,591 69.0 -14.7 5.6 1.4 27.8 26.9 1.0 4.103/10E 68,048 7,561 60.7 -12.0 6.3 1.1 19.7 20.8 0.9 4.0? Net sales were expected to grow by 16% YoY to Rs16b driven by 9.7% YoY (flat QoQ) higher realizations toRs3,339/ton and 4.8% growth in volumes to 4.58MT. Also, strong growth in RMC business (~46% YoY) wouldsupport revenue growth.? While domestic volume growth is estimated to rise 11% to 3.8MT, whereas exports are expected to decline by 17%to 0.8MT. While realizations in domestic market would remain stable, export realizations have declined by aboutUS$10/ton for cement and US$5/ton for clinker.? Higher cost push (in form of energy and freight cost) would result in 10.8pp YoY decline in EBITDA margin at 23.1%and 21% decline in EBITDA at Rs3b. However, higher depreciation and interest cost (on account of new capacity)would result in 32% de-growth in PAT to Rs1.9b.? We are revising our earnings estimate downward for FY09 by 4.3% to Rs69 and for FY10 by 15.7% to Rs60.7 tofactor in decline in export realizations and cost moderation. At 5.6x FY09E EPS and 4.1x FY09E EV/EBITDA,valuations do not fully reflect the improving operating performance and organic growth visibility at the low cost ofexpansion. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q* 2Q 3Q 4Q 1Q 2Q 3QE 4QESales (m ton) 4.47 3.62 4.37 4.82 4.34 3.98 4.58 5.29 17.28 18.19YoY Change (%) 0.4 0.4 -2.7 -4.6 -2.9 10.2 4.8 9.7 -2.3 5.3Realization (Rs/ton) 2,946 3,119 3,044 3,193 3,271 3,346 3,339 3,359 3,076 3,330YoY Change (%) 11.4 12.7 9.6 11.4 11.0 7.3 9.7 5.2 11.7 8.3QoQ Change (%) 2.8 5.9 -2.4 4.9 2.5 2.3 -0.2 0.6Net Sales 13,600 11,676 13,821 16,017 14,960 13,962 16,054 18,599 55,092 63,575YoY Change (%) 15.2 16.2 9.7 9.3 10.0 19.6 16.2 16.1 12.2 15.4Total Expenditure 9,222 8,366 9,137 11,132 10,501 10,995 12,344 13,836 37,892 47,676EBITDA 4,378 3,310 4,685 4,885 4,458 2,967 3,710 4,763 17,201 15,899Margins (%) 32.2 28.3 33.9 30.5 29.8 21.3 23.1 25.6 31.2 25.0Depreciation 559 581 583 650 711 808 950 1,034 2,372 3,503Interest 222 203 174 193 247 309 341 599 757 1,496Other Income 247 259 201 270 266 278 200 206 999 950PBT after EO Expense 3,844 2,786 4,129 4,312 3,766 2,129 2,619 3,335 15,070 11,850Tax 1,250 927 1,334 1,483 1,116 487 720 935 4,994 3,259Rate (%) 32.5 33.3 32.3 34.4 29.6 22.9 27.5 28.0 33.1 27.5Reported PAT 2,594 1,859 2,795 2,829 2,650 1,642 1,899 2,400 10,076 8,591Adj PAT 2,594 1,859 2,795 2,829 2,650 1,642 1,899 2,400 10,076 8,591YoY Change (%) 23.0 45.8 31.5 22.2 2.2 -11.7 -32.1 -15.2 28.8 -14.7E: MOSL Estimates; Quarterly results do not add up to full year results due to recastingJinesh K Gandhi (Jinesh@MotilalOswal.com); Tel +91 22 3982541631 December 2008103

Results PreviewQUARTER ENDING DECEMBER 2008EngineeringBSE Sensex: 9,647 S&P CNX: 2,959 31 December 2008COMPANY NAMEABBBharat ElectronicsBHELCrompton GreavesCummins IndiaIPP/capital goods indices witness sharp growth decelerationThe IIP Index for October 2008 witnessed negative growth of 0.4%, while growth in thecapital goods index stood at 3.1% YoY. While cumulative growth for the IIP index duringApril-October 2008 stands at 4.1% YoY, the capital goods index has witnessed growthof 9.2% YoY over the corresponding period of the pervious year. Both the indices havebeen showing strain until date during FY09, indicating moderation/slowdown in industrialactivity. A particularly negative IIP during October 2008 is ominous, given that is the firsttime the index has turned negative in the last 15 years. We believe the trend of moderation/slowdown of investments has become quite evident during 3QFY09.Larsen & ToubroSiemensSuzlon EnergyThermaxIIP INDEX (% YOY)20151050-5April6.24.4 5.4 6.4 5.51.4-0.4JuneFY07 FY08 FY09AugOctDecFebCAPITAL GOODS INDEX (% YOY)36271890April12.47.84.3JuneFY07 FY08 FY0917.9Aug0.918.5Oct3.1DecFebSource: Source: Ministry of StatisticsEXPECTED QUARTERLY PERFORMANCE SUMMARYRECO SALES EBITDA NET PROFIT(RS MILLION)DEC.08 CHG. (%) DEC.08 CHG. (%) DEC.08 CHG. (%)EngineeringABB Neutral 21,538 17.1 2,661 2.3 1,769 -2.2Bharat Electronics Buy 7,307 10.3 1,388 9.4 1,176 4.1BHEL Neutral 63,582 28.1 10,960 26.3 8,777 27.7Crompton Greaves Neutral 10,836 18.4 1,365 17.7 855 36.0Cummins India Buy 7,496 27.0 1,237 25.5 873 17.0Larsen & Toubro Neutral 79,068 23.9 9,672 28.1 5,721 11.1Siemens Neutral 20,164 5.1 2,111 36.4 1,370 25.7Suzlon Energy Neutral 37,050 16.9 4,446 14.3 1,328 -12.5Thermax Under Review 10,255 21.3 1,217 16.0 856 14.1Sector Aggregate 257,295 20.9 35,057 22.0 22,725 15.4Satyam Agarwal (Agarwals@MotilalOswal.com)Tel: +91 22 3982 5410/ Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)31 December 2008104

Engineering3QFY09: Expect strong numbersFor 3QFY09, we expect the capital goods space to deliver revenue growth of 20.7% YoY,EBITDA growth of 21.9% YoY, and net profit growth of 15.3% YoY. Performance for thesector continues to be strong, driven by the sector heavyweights, BHEL and L&T. Weexpect above-the-industry-average performance from BHEL and L&T, driven by strongexecution, benefits of lower commodity prices and operating leverage. We have witnesseda sharp decline in raw material prices (in steel, copper etc.) in the international markets,which should be positive for BHEL’s operating margins 4QFY09 onward. On the otherhand, in case of T&D players, a majority of the contracts are based on price variations,and thus large part of the gains would be passed to the consumer.Headwinds to order intake due to slowing private capex/exportsDuring the past 12 months, the order books for BHEL, L&T and ABB have remainedhealthy, driven by strong orders for projects in power equipment, hydrocarbons, processindustries etc. Suzlon and Siemens experienced stagnation of order book during past 6-9months due to: (a) Suzlon - issues related to blade cracks in the US market; (b) Siemens -lack of mega orders intake etc.The project award activity in the transmission and distribution segment is likely to pick upin 4QFY09, since: (1) twelve 765kV substations orders are expected by 4QFY09, and (2)a large part of the public sector spending occurs during last quarter of the year.ORDER INTAKE (RS M, %YOY)3QFY07 4QFY07 1QFY08 2QFY08 3QFY08 4QFY08 1QFY09 2QFY09 % YOYABB 14,216 20,003 19,963 16,683 20,033 26,954 22,086 18,891 13.2BHEL 79,730 133,480 109,696 146,393 109,289 137,323 159,313 147,983 1.1Crompton* NA NA 18,816 18,816 16,385 20,407 29,388 28,479 51.4L&T 94,970 76,630 98,810 75,470 130,190 119,750 122,340 124,530 65.0Siemens 51,275 19,477 17,536 7,791 19,120 23,422 20,883 23,851 86.6Suzlon 29,923 46,857 59,586 64,643 39,538 61,253 9,429 27,584 -57.3* Consolidated order book benefited YoY due to Euro/INR appreciation of 18% Source: CompanyORDER BACKLOG (RS B AND % YOY)BHEL provides thebest revenue visibilityin this spaceSEP 07 SEP 08 GROWTH (%) BOOK TO BILL (X)ABB 490 679 38.6 1.0BHEL 726 1,040 43.3 4.3Crompton Greaves* 52 68 31.0 0.9L&T 440 629 42.8 2.1Siemens 94 98 4.5 1.2Suzlon 163 141 -13.9 0.9* excluding the consumer and industrial division, the book to bill ratio will be at 1.1x. Source: Company31 December 2008105

EngineeringABB/SIEMENS HAS HIGHEST EXPOSURE (% ORDER BOOK) TO THE INDUSTRIAL CAPEXWe expect delays,cancellations etc. onaccount of difficulties infinancial closures andsharp decline in the demandfor the commoditiesGOVERNMENT INDUSTRIAL INFRASTRUCTURE CONSUMERSABB 62 38 0 0BHEL 79 19 2 0Crompton Greaves* 70 15 0 15Larsen and Toubro 20 42 39 0Siemens 48 37 8 8Suzlon 62 38 0 0* Based on the consolidated numbers Source: Company/MOSLProcess andhydrocarbons contributesmajority of industrialcapex. L&T/ABB/Siemenshave majority of industrialexposure to these twosegmentsINDUSTRIAL INVESTMENTS – MAJOR CONTRIBUTION FROM HYDROCARBONS AND METALSPROCESS HYDROCARBONS OTHERS TOTALABB 10 15 15 40BHEL NA NA NA ~10Crompton Greaves* ~10 ~5 ~10 ~25Larsen and Toubro 14 23 13 50Siemens 20 10 14 44* For standalone entity Source: Company/MOSLProfitability at the crossroadsFor 3QFY09, we expect EBITDA margin to be squeezed due to increased commodityprices during the previous 2-3 quarters (impact with time lag due to inventory of 3-6months) for players like BHEL and L&T. Due to price variation clause, profitability of theother players in the sector will be largely intact. At the sector level, we expect flat marginat 13.5% (+10bp YoY) during 3QFY09. During the next few quarters, 2-3 factors willdetermine the EBITDA margin:? Declining commodity prices will benefit EBITDA margins of players like BHEL andL&T, the players with partial fixed price contracts and longer execution cycle? Renegotiation of the existing project pricing will impact the EBITDA margin negativelyfor players like L&T, Siemens, ABB etc. – players with considerable exposure toprivate capex.? Recent appreciation of INR will have a positive impact on the companies like BHEL,ABB, Crompton etc. who have significant imports.TREND IN EBIDTA AND PAT MARGINS (%)20EBITDA Margin (LHS)Net Profit Margin (RHS)20161288.78.713.618.1 17.515.212.410.114.38.616.113.511.811.913.61612844Jun-05Sep-05Dec-05Mar-06Jun-06Sep-06Dec-06Mar-07Jun-07Sep-07Dec-07Mar-08Jun-08Sep-08Dec-08Source: MOSL31 December 2008106

EngineeringFIXED PRICE CONTRACTS, % ORDER BOOKCOMPANY RM/SALES (%) FIXED PRICE CONTRACTS/ ORDER BOOK (%)ABB 74.0 NABHEL 47.6 ~50Crompton 70.0 NAL&T 43.3 ~35Siemens 80.7 ~50Suzlon 58.0 ~68Source: CompanySTEEL PRICES, DOMESTIC PRICES, MUMBAI (RS ‘000/TON)54,000HRC (2.5mm)CR (0.63mm)48,00042,00036,00030,000Nov-07Dec-07Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Source: JPC/Mumbai PricesWe remain Neutral on the sectorWe remain Neutral on the capital goods sector. Earnings visibility has blurred for thesector (except BHEL) due to difficulties in financial closures of the projects, possibledelays/deferments etc. of the private/industrial capex. Also, due to sharp decline in thecrude oil prices, Middle East investments could witness moderation. Given the currentuncertainties, the sector valuation appears to be fair.31 December 2008107

EngineeringStock performance and valuationsSTOCK PERFORMANCE (%)ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEAREngineeringABB -42 -70 -17 -18 -11 -8Bharat Electron -16 -64 9 -12 15 -2BHEL -14 -47 11 5 17 15Crompton Greaves -42 -66 -17 -13 -11 -4Cummins India -27 -47 -2 6 4 16Larsen & Toubro -37 -63 -12 -10 -6 -1Siemens -28 -70 -3 -17 3 -7Suzlon Energy -59 -84 -34 -31 -28 -22Thermax -57 -78 -32 -26 -26 -16RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)102SensexMOSL Engineering Index110MOSL Engineering IndexSensex92908270725062Sep-08 Oct-08 Nov-08 Dec-0830Dec-07 Mar-08 Jun-08 Sep-08 Dec-08COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EEngineeringABB 453 Neutral 23.2 24.4 28.2 19.5 18.6 16.1 12.3 11.4 9.5 34.8 27.7 25.3Bharat Electronics 752 Buy 103.4 99.6 138.4 7.3 7.6 5.4 3.4 2.9 1.4 29.4 23.4 26.6BHEL 1,362 Neutral 51.3 67.9 86.5 26.6 20.1 15.7 15.6 14.1 9.7 25.7 28.2 29.8Crompton Greaves 135 Neutral 10.0 13.8 15.0 13.5 9.8 9.0 10.1 8.3 7.6 34.3 34.3 28.5Cummins India 222 Buy 16.4 20.6 25.8 13.5 10.7 8.6 21.7 17.4 13.8 28.8 29.8 30.4Larsen & Toubro 774 Neutral 39.3 52.6 57.4 19.7 14.7 13.5 16.2 12.5 10.9 27.0 24.1 22.7Siemens 287 Neutral 15.2 18.2 19.4 18.9 15.8 14.8 11.1 9.0 8.1 27.7 26.1 23.0Suzlon Energy 62 Neutral 8.1 8.2 9.2 7.7 7.6 6.8 5.9 6.4 5.8 21.7 13.3 12.3Thermax 180 UR 24.1 26.8 29.5 7.5 6.7 6.1 5.2 4.3 3.6 42.4 37.9 34.1Sector Aggregate 17.8 14.6 12.4 12.4 10.7 8.5 25.4 24.1 24.1UR = Under Review31 December 2008108

Results PreviewSECTOR: ENGINEERINGABBSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGABB INREUTERS CODEABB.BOEquity Shares (m) 212.052-Week Range 1,532/3791,6,12 Rel. Perf. (%) -3/-16/-18M.Cap. (Rs b) 96.1M.Cap. (US$ b) 2.031 December 2008NeutralPrevious Recommendation: NeutralRs453YEAR NET SALES PAT EPS EPS GR. P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA12/07A 59,303 4,917 23.2 44.5 19.5 5.9 34.8 53.5 1.5 12.312/08E 68,245 5,163 24.4 5.0 18.6 4.6 27.7 44.2 1.3 11.412/09E 79,554 5,979 28.2 15.8 16.1 3.7 25.3 39.1 1.1 9.512/10E 87,934 6,005 28.3 0.4 16.0 3.0 20.8 32.1 0.9 9.1? Order intake in 3QCY08 stood at Rs18.9b (up 13.2% YoY, down 14.5% QoQ). Even during 2QCY08, order intakegrowth stood at 10.6% YoY, which is the lowest since 1QCY03. Order backlog as of September 2008 stands atRs67.9b (up 38.6% YoY), book to bill ratio of 1.1x CY08E revenues.? EBITDA margin during 3QCY08 was down 365bp YoY to 8.9%, much lower than previous quarters. All businessdivisions, except power systems, reported a decline in EBIT margins.? During 3QCY08, ABB’s revenue growth was 10% YoY — the slowest growth since the past 23 quarters. Revenuegrowth has been impacted due to decline of 1% YoY in the project business (power systems and process automation),which contributes 50% to revenues. We believe that lower growth in the project business is because the company hasbeen focusing on larger sized projects (Rs2b+), which entail an execution period of 15-20 months, resulting in unevenquarterly revenue bookings. Contribution from the project division has increased to 55%+ in CY07, from 54.3% inCY06 and 49.8% in CY05.? Expect share of exports to increase (currently 10% of revenues), as the parent company increases focus on outsourcing.Key competition for exports to the ABB group will be from low-cost countries like China, Brazil, Russia, Indonesia,etc. A majority of the contracts entail PVC, thus the commodity price decline would be largely pass through. Thiscould result in short term EBITDA margin benefits.? The stock trades at 18.6x CY08E and 16.1x CY09E earnings. We estimate EPS of Rs24.4/sh for CY08 and Rs28.2/sh for CY09. Maintain Neutral.QUARTERLY PERFORMANCE(RS MILLION)Y/E DECEMBER CY07 CY08 CY07 CY08E31 December 20081Q 2Q 3Q 4Q 1Q 2Q 3Q 4QESales 13,124 14,009 13,775 18,394 15,353 16,163 15,191 21,538 59,303 68,245Change (%) 63.5 43.8 28.7 29.0 17.0 15.4 10.3 17.1 38.8 15.1EBITDA 1,282 1,638 1,724 2,602 1,728 1,902 1,348 2,661 7,246 7,639Change (%) 84.6 60.6 55.9 33.7 34.8 16.1 -21.8 2.3 52.0 5.4As % of Sales 9.8 11.7 12.5 14.1 11.3 11.8 8.9 12.4 12.2 11.2Depreciation 86 77 79 82 83 88 92 97 324 361Interest 10 23 16 20 28 8 67 77 68 180Other Income 152 147 158 254 185 184 399 224 710 993Extra-ordinary Income 0 0 0 0 0 29 0 0 0 29PBT 1,337 1,686 1,787 2,755 1,801 2,019 1,589 2,711 7,565 8,120Tax 471 600 630 947 624 701 540 943 2,648 2,808Effective Tax Rate (%) 35.2 35.6 35.3 34.4 34.6 34.7 34.0 34.8 35.0 34.6Repoted PAT 866 1,086 1,157 1,808 1,177 1,318 1,048 1,769 4,917 5,312Adj. PAT 866 1,079 1,170 1,808 1,177 1,289 927 1,769 4,917 5,163Change (%) 50.0 42.5 34.0 44.5 35.9 19.5 -20.8 -2.2 44.5 5.0E: MOSL EstimatesSatyam Agarwal (Agarwals@MotilalOswal.com)Tel: +91 22 3982 5410/ Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)109

Results PreviewSECTOR: ENGINEERINGBharat ElectronicsSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGBHE INREUTERS CODEBAJE.BO31 December 2008Previous Recommendation: BuyBuyRs752Equity Shares (m) 80.052-Week Range 2,170/5451,6,12 Rel. Perf. (%) 28/2/-12M.Cap. (Rs b) 60.2M.Cap. (US$ b) 1.2YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 39,002 7,182 89.8 23.2 8.4 2.3 32.9 32.9 1.0 3.63/08A 40,603 8,272 103.4 15.2 7.3 1.9 29.4 29.4 0.8 3.43/09E 45,666 7,965 99.6 -3.7 7.6 1.6 23.4 23.8 0.7 2.93/10E 59,476 11,075 138.4 39.1 5.4 1.3 26.6 26.6 0.7 1.4? For 3QFY09, we expect Bharat Electronics to report revenue of Rs7.3b, up 10.3% YoY; EBITDA of Rs1.4b, up9.4% YoY; and net profit of Rs1.2b, up 4.1% YoY.? Management has guided for revenue of Rs100b for FY12, which is higher than the previous (April 2007) guidance ofUS$2b by FY12. It implies an impressive CAGR of 24.9% over FY08 gross revenues of Rs41.1b. Order bookposition at the end of FY08 stands at Rs95.9b, up from Rs91.3b in FY07, to be executable over a period of 2-3 years.The order book is close to 2.3x its FY08 revenue of Rs40.7b.? Every year BEL signs an MoU with the Ministry of Defense stating its target for the year. During FY09, BEL has toclock a turnover of Rs46.5b to achieve an excellent rating from the government. During FY08, BEL has achieved anexcellent rating.? BEL has signed MoUs with: (1) Lockheed Martin to explore business opportunities for co-production of domesticaerospace and defense electronics needs; (2) Elbit Systems Electro Optics ELOP Ltd., Israel, to set up a JV fordevelopment, production and marketing of Thermal Imaging Cameras and Forward Looking Infra Red (FLIRs) forthe Indian and global markets; and (3) Northrop Grumman Corp. to explore business opportunities for co-productionin current and future aerospace and defense needs of India and international markets of Northrop Grummans.? We expect the company to post revenue and earnings CAGR of 21% and 16% respectively during FY08-10E. Thestock trades at a P/E of 7.1x FY09E and 5.1x FY10E. Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 4,044 7,089 6,622 22,937 3,839 7,807 7,307 26,714 40,693 45,666Change (%) -16.3 -15.0 -23.3 32.3 -5.1 10.1 10.3 16.5 4.5 12.2EBITDA -46 1,534 1,269 6,986 -326 1,626 1,388 7,657 9,742 10,345Change (%) -106.4 -17.8 -35.8 44.1 -606.4 6.0 9.4 9.6 3.5 6.2As of % Sales -1.1 21.6 19.2 30.5 -8.5 20.8 19.0 28.7 23.9 22.7Depreciation 211 221 234 269 240 256 256 243 935 996Interest 1 0 0 1 0 71 55 54 3 180Other Income 656 497 647 522 612 532 704 695 2,303 2,543Exceptional Items (reported) 0 0 0 212 0 0 0 0 232 0PBT 398 1,809 1,681 7,450 46 1,832 1,781 8,054 11,338 11,713Tax 135 581 552 2,402 20 594 606 2,528 3,669 3,748Effective Tax Rate (%) 33.9 32.1 32.8 32.2 44.8 32.4 34.0 31.4 32.4 32.0Reported PAT 263 1,228 1,130 5,048 25 1,237 1,176 5,526 7,670 7,965Change (%) -56.4 -17.2 -23.8 41.3 -90.4 0.7 4.1 9.5 7.4 3.8Adj PAT 263 1,228 1,130 4,836 25 1,237 1,176 5,526 7,438 7,965E: MOSL EstimatesSatyam Agarwal (Agarwals@MotilalOswal.com)Tel: +91 22 3982 5410/ Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)31 December 2008110

Results PreviewSECTOR: ENGINEERINGBHELSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGBHEL INREUTERS CODEBHEL.BO31 December 2008Previous Recommendation: NeutralNeutralRs1,362Equity Shares (m) 489.552-Week Range 2,626/9841,6,12 Rel. Perf. (%) -6/27/5M.Cap. (Rs b) 666.9M.Cap. (US$ b) 13.7YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 176,427 24,144 49.3 44.0 27.6 7.6 30.0 50.0 3.5 16.903/08A 197,652 25,095 51.3 3.9 26.6 6.2 25.7 51.1 3.0 15.603/09E 254,103 33,240 67.9 32.5 20.1 5.2 28.2 43.4 2.4 14.103/10E 311,286 42,361 86.5 27.4 15.7 4.2 29.8 49.0 2.0 9.7? For 3QFY09, we expect revenue to grow 28.1% YoY to Rs63.6b, adjusted EBITDA to increase by 17.2% YoY toRs11b and net profit to grow by 27.7% YoY to Rs8.8b.? The order book stood at Rs1,040b as of September 2008, up 43.3% YoY, while the order intake during 1HFY09 wasat Rs3.7b. The current order backlog represents a book-to-bill ratio of 4.3x on TTM revenues of Rs240b.? During 1QFY09, BHEL indicated that total provisions for wage revisions would be at Rs19.1b over 9 quartersstarting from 4QFY07 to 4QFY09 i.e. Rs2.1b/quarter. Based on the provisioning of Rs5.9b during 4QFY07 andFY08, the provisions to be made during FY09 are Rs13.1b. Out of this, Rs5.5b has been provided during 1HFY09,indicating relatively higher provisioning of Rs7.7b during 2HFY09.? During 3QFY09, BHEL bagged several large orders of ~Rs60b including, a key order of TG package for supercriticalpower projects of 1,320MW at NTPC’s Barh-II (Rs14.7b), 500MW Jaiprakash’s Bina power project (Rs11.8b),1,000MW (Rs21b) Mauda Super Thermal Power Project (STPP) in Maharashtra, order for 600MW (Rs13.3b)Kakatiya Thermal Power Station Stage-II etc.? BHEL signed a JV agreement with TNEB for setting up (800x2) supercritical thermal power projects in Tamil Nadu,which will cost Rs87b.? The stock trades at a P/E of 20.1x FY09E and 15.7x FY10E. Maintain Neutral.QUARTERLY PERFORMANCE31 December 2008(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 32,339 39,654 49,641 72,019 43,292 53,426 63,582 88,668 193,654 248,969Change (%) 21.7 18.7 14.4 4.1 33.9 34.7 28.1 23.1 12.3 28.6EBITDA 3,107 6,952 9,976 13,633 3,737 7,107 9,248 16,367 33,667 36,460Change (%) -2.4 52.4 7.4 -14.1 20.3 2.2 -7.3 20.1 2.3 8.3As a % Sales 9.6 17.5 20.1 18.9 8.6 13.3 14.5 18.5 17.4 14.6Adjusted EBITDA 1,808 5,654 8,677 14,174 4,901 7,176 10,960 18,079 32,312 41,115Change (%) -43.2 23.9 -6.6 -2.7 171.0 26.9 26.3 27.6 2.2 27.2As a % Sales 5.6 14.3 17.5 19.7 11.3 13.4 17.2 20.4 16.7 16.5Interest 22 193 98 42 26 22 40 61 354 149Depreciation 689 694 762 827 726 744 781 858 2,972 3,109Other Income 2,063 5,009 2,649 4,242 2,917 3,072 3,364 3,928 13,962 13,281PBT 4,460 11,074 11,765 17,005 5,903 9,414 11,791 19,376 44,303 46,484Tax 1,570 4,197 4,046 5,897 2,059 3,256 4,127 6,828 15,711 16,269Effective Tax Rate (%) 35.2 37.9 34.4 34.7 34.9 34.6 35.0 35.2 35.5 35.0Reported PAT 2,890 6,877 7,719 11,108 3,844 6,158 7,664 12,549 28,593 30,215Change (%) 22.1 91.0 15.6 -3.5 33.0 -10.5 -0.7 13.0 18.4 5.7Adj. PAT 2,045 4,716 6,875 11,459 4,600 6,202 8,777 13,661 25,095 33,240Change (%) -13.6 31.0 3.0 -0.4 124.9 31.5 27.7 19.2 3.9 32.5E: MOSL EstimatesSatyam Agarwal (Agarwals@MotilalOswal.com)Tel: +91 22 3982 5410/ Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)111

Results PreviewSECTOR: ENGINEERINGCrompton GreavesSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGCRG INREUTERS CODECROM.BO31 December 2008Previous Recommendation: NeutralNeutralRs135Equity Shares (m) 366.652-Week Range 410/1061,6,12 Rel. Perf. (%) 8/-11/-13M.Cap. (Rs b) 49.5M.Cap. (US$ b) 1.0QUARTERLY PERFORMANCE (STANDALONE)31 December 2008YEAR NET SALES PAT* EPS* EPS GR. P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA3/07A 33,676 2,283 6.2 0.6 21.7 7.3 30.7 38.3 1.5 14.83/08A 38,758 3,654 10.0 60.0 13.5 5.3 34.3 50.0 1.3 10.13/09E 46,231 5,064 13.8 38.6 9.8 4.1 34.3 46.8 1.0 8.33/10E 52,575 5,503 15.0 8.7 9.0 3.3 28.5 40.5 0.9 7.6* Consolidated; pre-exceptionals? For 3QFY09, we expect Crompton to report standalone revenue of Rs10.8b, up 18.4% YoY, EBITDA of Rs1.4b, up17.7% YoY, and net profit of Rs855m, up 36% YoY. As of September 2008, the order book (standalone) stood atRs27.7b, up 26% YoY, and the order book for Pauwels and Ganz put together stands at Rs40.4b, up 34.6% YoY andthe order book for Pauwels and Ganz is higher since the Euro has appreciated YoY against INR by ~18% YoY.? During 2QFY09, the international business (Pauwels /Ganz/Microsal) witnessed a 50% YoY growth to Rs10b, partlydue to the Euro appreciation of 18% YoY against the INR and addition of Microsal. But even excluding the impact ofthese two aspects, the international business grew at ~30% YoY, higher versus management guidance of 20% YoYgrowth for the full year FY09. We expect the growth to moderate in the international market during 2HFY09.? Recently Crompton lowered the FY09 capex target by ~50% given the market uncertainties. Crompton has curtailedthe capex for FY09 at ~Rs1b, v/s initial target of Rs2b (consolidated). This is unlikely to have any impact on FY09revenues, since the capex was directed towards FY10 requirements. Management indicated that the company iscautious, given the recent uncertainties. Given that the lead time stands at 8-10 months, the capex can be undertakenduring FY10, based on the market requirements.? Management has guided for 18-20% revenue growth in FY09 and 15-20% in FY10. EBIDTA margin in FY09/FY10are expected to be maintained.? We expect Crompton to report consolidated earnings of Rs13.8/sh in FY09 (up 38.6% YoY) and Rs15/sh in FY10 (up8.7% YoY). The stock trades at a P/E of 9.8x FY09E and 9x FY10E. Maintain Neutral.(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 8,961 9,050 9,152 11,595 10,829 10,862 10,836 13,704 38,758 46,231Change (%) 21.0 9.8 12.6 17.1 20.8 20.0 18.4 18.2 15.1 19.3EBITDA 1,045 1,068 1,160 1,566 1,381 1,435 1,365 1,588 4,838 5,769Change (%) 44.8 45.2 41.8 36.9 32.2 34.4 17.7 1.5 41.5 19.2As of % Sales (Adj) 11.7 11.8 12.7 13.5 12.8 13.2 12.6 11.6 12.5 12.5Depreciation 105 113 115 74 108 120 132 152 407 512Interest 66 60 72 74 22 39 25 40 271 126Other Income 126 185 144 241 81 102 108 121 696 413PBT 1,000 1,080 1,117 1,659 1,332 1,379 1,316 1,517 4,856 5,544Tax 313 339 438 628 443 453 461 528 1,717 1,885Effective Tax Rate (%) 31.2 31.4 39.2 37.8 33.3 32.9 35.0 34.8 35.4 34.0Reported PAT 688 742 679 1,031 889 925 855 989 3,139 3,659Adj PAT 538 642 629 944 889 925 855 989 2,752 3,659Change (%) 47.8 65.9 38.5 26.0 65.3 44.3 36.0 4.8 40.9 32.9E: MOSL EstimatesSatyam Agarwal (Agarwals@MotilalOswal.com)Tel: +91 22 3982 5410/ Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)112

Results PreviewSECTOR: ENGINEERINGCummins IndiaSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGKKC INREUTERS CODECUMM.BO31 December 2008Previous Recommendation: BuyBuyRs222Equity shares (m) 198.052-Week Range 421/1851, 6, 12 Rel. Perf. (%) -1/24/6M. Cap. (Rs b) 46.0M. Cap. (US$ b) 0.9YEAR NET SALES PAT EPS EPS GR. P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA03/07A 21,228 2,680 13.5 45.9 28.6 35.803/08A 26,555 3,249 16.4 21.2 13.5 3.6 28.8 34.9 1.3 8.803/09E 34,581 4,088 20.6 25.8 10.8 2.9 29.8 36.9 1.0 7.203/10E 42,256 5,109 25.8 25.0 8.6 2.4 30.4 38.1 0.8 5.5Consolidated numbers? For 3QFY09, Cummins India decided to exit its genset rental business by selling this off to the Indian subsidiary ofAggreko Plc, UK, for about Rs300m (annual revenue from this business was about Rs220m). We believe this is apositive as it helps the company focus on its core business of engines and gensets.? Cummins declared an interim dividend of Rs2.40 per share (120%) mainly to distribute the benefits of the Aggrekodeal. We believe this also reflects the management’s confidence in the profitability of the company for the remainderof FY09.? We estimate 3QFY09 sales at Rs7.5b, up 27% YoY, on the back of steady volume growth and the weaker rupeehelping exports. Lower commodity prices coupled with Six Sigma initiatives should help Cummins sustain margins.We expect PAT growth of 17% YoY to Rs873m.? The stock trades at a P/E of 10.8x FY09E and 8.6x FY10E. We maintain Buy with a target price of Rs387 (15xFY10E EPS).QUARTERLY PERFORMANCE (STANDALONE)31 December 2008(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 5,423 5,282 5,902 6,700 7,070 7,898 7,496 8,547 23,308 34,581Change (%) 38.5 13.0 23.7 32.7 30.4 49.5 27.0 27.6 26.6 48.4Total Expenses 4,684 4,556 5,035 5,964 6,133 6,852 6,409 7,276 20,239 29,716Reported EBITDA 740 726 867 736 938 1,047 1,087 1,271 3,069 4,865Margin (%) 13.6 13.7 14.7 11.0 13.3 13.2 14.5 14.9 13.2 14.1Operating Other Income * 108 106 118 322 232 186 150 115 654 692EBITDA 848 831 985 1,058 1,169 1,232 1,237 1,386 3,723 5,556Change (%) 21.6 -5.5 21.1 14.5 37.8 48.2 25.5 30.9 11.4 49.2EBITDA Margin (%) 15.6 15.7 16.7 15.8 16.5 15.6 16.5 16.2 16.0 16.1Depreciation 76 77 86 90 99 99 100 90 330 439Interest 2 1 0 4 6 2 0 5 7 14Financial Income * 123 157 151 142 145 158 110 137 573 465PBT 894 911 1,049 1,106 1,210 1,290 1,247 1,427 3,960 5,569Tax 253 246 303 350 327 350 374 488 1,153 1,766Tax/PBT (%) 28.3 27.0 28.9 31.7 27.1 27.2 30.0 34.2 29.1 31.7Standalone PAT 640 665 746 756 882 939 873 939 2,807 3,803Change (%) 26.1 6.0 18.6 15.1 37.8 41.3 17.0 24.2 16.0 35.5Profit from Subsidiaries and Associates (includes Cummins Sales & Services in FY08) 442 285Consolidated PAT 3,249 4,088Change (%) 21.2 25.8E: MOSt Estimates; * Classification of Other income into Operating and Financial for the quarters are estimates** Full year standalone numbers not strictly comparable due to merger of Cummins Sales & Services w.e.f. 1 April 2008Shrinath Mithanthaya (ShrinathM@MotilalOswal.com); Tel: +91 22 3982 5421113

Results PreviewSECTOR: ENGINEERINGLarsen & ToubroSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGLT INREUTERS CODELART.BOEquity Shares (m) 584.752-Week Range 2,200/6701,6,12 Rel. Perf. (%) 0/-1/-10M.Cap. (Rs b) 452.8M.Cap. (US$ b) 9.331 December 2008NeutralPrevious Recommendation: NeutralRs774YEAR NET SALES PAT * EPS* EPS GR. P/E* P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA3/07A 176,846 18,310 31.4 78.0 24.7 7.9 26.1 28.2 2.5 24.43/08A 249,387 22,910 39.3 25.1 19.7 4.7 27.0 29.5 1.8 16.23/09E 322,370 30,681 52.6 33.9 14.7 4.0 24.1 27.2 1.5 12.53/10E 387,409 33,507 57.4 9.2 13.5 3.4 22.7 25.5 1.3 10.9QUARTERLY PERFORMANCE (STANDALONE)31 December 2008* Consolidated; EPS is fully diluted? L&T’s order backlog as of end-September 2008 stood at Rs629b, up 42.8% YoY against Rs440b in September 2007.The order book-to-bill ratio on TTM basis stands at 2.1x. During the quarter, L&T bagged several large ordersincluding, Rs13.5b Monorail project in Mumbai, Rs5.8b water supply scheme order from Hyderabad, Andhra Pradesh,Rs7b order for Buildings and Factories for major players including TCS, Godrej properties etc., and Rs13.7b ordersin the metal space from Vedanta, Utkal Aluminum, Bhushan Steel etc.? No delays/cancellations are expected in hydrocarbons etc. The segments which are more prone to delays, includereal estate (6% of order book) and metals / minerals (8-9% of order book). Also, of the 6% of order book from realestate, ~3% is from in-house projects, thus restricting the impact.? Management reiterated order intake guidance of 30% YoY growth during FY09, despite some delays in terms oforder awards. This will be largely driven by increased pace of order intake from segments like hydrocarbons, powerequipmentand roads (BOT projects). During the run-up to the general elections, we expect accelerated pace oforder award from infrastructure projects, while hydrocarbons (ONGC orders) should start contributing in 2HFY09.Order intake announced during Oct-Dec 2008 (YTD) stands at Rs44b.? Standalone capex for FY09 has been reduced to Rs15b now from earlier Rs20b. During 1HFY09, the capex stood atRs8b, indicating that 2HFY09 capex has been cut sharply. Also, the FY10 capex is now expected to be lower thanRs15b v/s earlier guidance of Rs20b.? The stock trades at a P/E of 14.7x FY09E and 13.5x FY10E. Maintain Neutral.(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 45,052 54,999 63,827 84,669 69,014 76,864 79,068 96,367 248,547 321,313Change (%) 29.9 47.2 55.0 35.5 53.2 39.8 23.9 13.8 41.4 29.3EBITDA 4,738 6,526 7,551 13,071 7,767 7,606 9,672 15,562 31,854 40,608Change (%) 75.6 113.1 45.6 34.5 63.9 16.6 28.1 19.1 61.2 32.7Adjusted Margin (%) 10.5 11.9 11.9 15.4 11.3 10.7 12.2 16.1 12.8 12.6Depreciation 424 483 527 682 659 731 760 778 2,116 2,927Interest 157 132 438 499 382 690 794 802 1,227 2,668Other Income 1,608 -430 360 632 825 720 550 896 2,170 2,991Reported PBT 5,764 5,481 6,946 12,523 7,551 6,906 8,669 14,879 30,682 38,004Tax 1,995 2,001 2,128 3,696 2,526 2,304 2,947 5,007 9,821 12,784Effective Tax Rate (%) 34.6 36.5 30.6 29.5 33.5 33.4 34.0 33.6 32.0 33.6Reported Profit 3,769 3,480 4,817 8,827 5,025 4,602 5,721 9,872 21,734 25,220Adjusted PAT 2,924 3,836 5,148 9,132 4,906 5,004 5,721 9,872 21,040 25,502Change (%) 59.0 109.5 49.7 30.3 67.8 30.4 11.1 8.1 52.0 21.2E: MOSL Estimates; All quarterly numbers are for standalone entitySatyam Agarwal (Agarwals@MotilalOswal.com)Tel: +91 22 3982 5410/ Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)114

Results PreviewSECTOR: ENGINEERINGSiemensSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGSIEM INREUTERS CODESIEM.BO31 December 2008Previous Recommendation: NeutralNeutralRs287Equity Shares (m) 337.252-Week Range 1,047/2101,6,12 Rel. Perf. (%) 22/2/-17M.Cap. (Rs b) 96.8M.Cap. (US$ b) 2.0YEAR NET SALES PAT* EPS* EPS GR. P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA9/07A 77,660 5,369 15.9 35.1 18.0 6.1 40.1 69.1 1.2 12.49/08A 83,582 5,124 15.2 -4.6 18.9 4.6 27.7 44.9 1.0 11.19/09E 83,568 6,134 18.2 19.7 15.8 3.7 26.1 39.5 1.0 9.0*Consolidated? For 1QFY09 (September year ending), we expect Siemens to report revenue of Rs20.2b, up 5.1% YoY, EBIDTA ofRs2.1b (up 36.4% YoY), and net profit of Rs1.4b, up 25.7% YoY.? Order intake during FY08 stood at Rs87.2b (down 14% YoY), while order backlog at Rs98.3b is down 11% fromend-1QFY07 (down from levels 8 quarters ago). This was largely due to receipt of mega orders, including Rs36bfrom Qatar during FY07. Also, consolidated order intake stands at Rs102b in FY08, down 12%. Adjusted for theeffect of mega orders, order intake is up 27% YoY.? Consolidated results for FY08 were disappointing due to poor performance of SISL and goodwill write off (pertainingto acquisition of 77% stake in iMetrex in April 2007). SISL reported revenues of Rs9.9b in FY08 (down 2.9% YoY)and net profit of Rs339m (down 78% YoY). The decline in profits is due to the business restructuring at Siemens AG,wherein SISL will now bill on cost-plus basis. PBT margins for SISL have eroded from 22.7% in FY05 to 7.4% inFY08, and we expect margins to further decline to 7.0% in FY09 and 6.7% in FY10.? The management stated post annual results that the automation and drives segment is expected to grow at a moderatepace, given the global uncertainties; while the general economy slowdown will impact other business segments. Also,the initial feelers from marketing team indicate slowdown in terms of project award, going forward.? The stock trades at a P/E of 18.9x FY08 and 15.8x FY09E. We maintain Neutral.QUARTERLY PERFORMANCE (STANDALONE)(RS MILLION)Y/E SEPTEMBER FY08 FY09E FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QTotal Revenues 19,195 21,546 18,204 24,636 20,164 22,878 18,403 22,123 83,582 83,568Change (%) 17.5 0.9 1.7 11.7 5.1 6.2 1.1 -10.2 7.6 0.0EBITDA 1,548 152 2,654 3,437 2,111 2,628 1,752 2,462 7,791 8,953Change (%) 25.4 -90.9 191.7 -3.9 36.4 1,627.1 -34.0 -28.4 5.1 14.9As % of Revenues 8.1 0.7 14.6 13.9 10.5 11.5 9.5 11.1 9.3 10.7Depreciation 151 149 161 178 178 180 180 170 639 709Interest Income 131 54 111 157 144 102 122 129 451 497Other Income 16 15 16 21 0 0 0 0 67 0Extra-ordinary Items 1,246 0 0 0 0 0 0 0 1,246 0PBT 2,789 71 2,620 3,436 2,076 2,549 1,693 2,422 8,916 8,741Tax 819 55 926 1,186 706 867 576 736 2,984 2,884Effective Tax Rate (%) 29.4 76.6 35.3 34.5 34.0 34.0 34.0 30.4 33.5 33.0Reported PAT 1,970 17 1,694 2,250 1,370 1,683 1,117 1,686 5,931 5,856Adjusted PAT 1,090 17 1,694 2,250 1,370 1,683 1,117 1,686 5,051 5,856Change (%) 10.8 -98.5 164.0 14.8 25.7 9,993 -34.0 -25.1 8.1 15.9E: MOSL Estimates; Nos are for standalone entitySatyam Agarwal (Agarwals@MotilalOswal.com)Tel: +91 22 3982 5410/ Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)31 December 2008115

Results PreviewSECTOR: ENGINEERINGSuzlon EnergySTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGSUEL INREUTERS CODESUZL.BO31 December 2008Previous Recommendation: NeutralNeutralRs62Equity Shares (m) 1,497.052-Week Range 460/361,6,12 Rel. Perf. (%) 43/-43/-31M.Cap. (Rs b) 93.3M.Cap. (US$ b) 1.9QUARTERLY PERFORMANCE (CONSOLIDATED)31 December 2008YEAR NET SALES PAT* EPS* EPS GR.* P/E* P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA3/07A 79,857 8,641 6.0 19.6 10.4 2.6 27.6 21.0 1.6 9.53/08A 136,794 12,607 8.1 35.2 7.7 1.2 21.7 15.3 0.9 5.93/09E 196,149 12,776 8.2 1.5 7.6 0.9 13.3 11.7 0.9 6.53/10E 207,455 14,202 9.2 11.2 6.8 0.8 12.3 10.5 0.8 5.9* Consolidated? For 3QFY09, we expect WTG business revenue of Rs37b, EBITDA of Rs4.4b and adjusted net profit of Rs1.3b.Starting from 2QFY09, Suzlon has changed the quarterly reporting. It now reports only WTG business numbers asagainst the consolidated number earlier. Thus, the comparable numbers are not available for 3QFY08.? Current order book stands at Rs141b (-14.8% QoQ) versus the Rs183b order book at end-4QFY08. While thedomestic order book is 244MW, the international order book stands at 2,269MW.? Slower order intake is largely due to lower order intake in the US, Europe and China. The projects are getting delayedin China due to delay in releasing funds from the banking system. Suzlon has decided to focus more on the Europeanmarket to improve the order intake in the largest wind energy market. Suzlon has not bagged any large order from theUS market post the blade crack issues during 4QFY08.? Suzlon and the Martifer Group of Portugal reported an agreement on a revised payment schedule for Martifer’s22.4% stake in Repower. Suzlon now will pay Martifer approximately Euro65m in December 2008, Euro30m in April,2009, and a final tranche of Euro175m in May 2009. Upon completion of this transaction, Suzlon will reach anownership level of approximately 91% in REpower. This is against the initial schedule and one-time payment ofEuro270m in December 2008.? We expect Suzlon to report EPS of Rs8.2/sh for FY09 and Rs9.2/sh for FY10. The stock trades at a P/E of 7.6xFY09E and 6.8x FY10E consolidated earnings. We maintain Neutral.(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 15,018 31,375 31,698 49,238 20,866 41,818 37,050 55,181 114,665 154,915Change (%) 65.6 68.9 38.9 33.3 35.1EBITDA 1,275 5,404 3,889 7,246 3,022 4,126 4,446 8,630 17,136 20,224Change (%) 52.7 46.3 137.0 -23.6 18.0As of % Sales 8.5 17.2 12.3 14.7 14.5 9.9 12.0 15.6 14.9 13.1Depreciation 328 384 747 978 486 625 844 1,113 1,703 3,068Interest 975 1,213 1,565 1,290 1,205 1,885 2,205 2,512 4,603 7,807Other Income 358 435 725 959 429 159 203 420 1,968 1,211Exceptional Items (reported) 207 165 0 0 2,298 2,778 0 0 2,852 5,076PBT 124 4,076 2,302 5,938 -538 -1,003 1,600 5,425 9,946 5,485Tax -49 328 873 543 351 302 272 909 1,493 1,834Effective Tax Rate (%) (39.6) 8.0 37.9 9.1 (65.4) (30.1) 17.0 16.7 15.0 33.4Reported PAT 173 3,748 1,428 5,395 -889 -1,305 1,328 4,517 8,453 3,650Change (%) -27.3 58.1 -17.3 50.3 -162.2 -124.2 -56.8Adj. PAT 380 3,913 1,517 4,648 1,409 1,473 1,328 4,517 11,305 8,727Change (%) -6.3 66.3 -13.0 29.5 -7.1 -68.3 -22.8E: MOSL Estimates; excluding share of profit from Repower; * Loss on FCCB included in the interest costSatyam Agarwal (Agarwals@MotilalOswal.com)Tel: +91 22 3982 5410/ Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)116

Results PreviewSECTOR: ENGINEERINGThermaxSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGTMX INREUTERS CODETHMX.BO31 December 2008Previous Recommendation: BuyUnder ReviewRs180Equity Shares (m) 119.252-Week Range (Rs) 885/1511,6,12 Rel. Perf. (%) -3/-23/-26M.Cap. (Rs b) 21.4M.Cap. (US$ b) 0.4YEAR NET SALES PAT* EPS* EPS GR.* P/E* P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA03/07A 21,730 1,976 16.6 92.7 10.8 3.7 35.5 56.2 1.0 7.303/08A 32,042 2,876 24.1 45.5 7.5 2.9 42.4 64.1 0.7 5.203/09E 38,306 3,194 26.8 11.1 6.7 2.4 37.9 56.4 0.5 4.303/10E 45,617 3,510 29.5 9.9 6.1 2.0 34.1 50.9 0.4 3.6* Consolidated? For 3QFY09, we expect revenue of Rs10.3b, up 21.3% YoY, EBITDA of Rs1.2b and net profit of Rs856m, up 14.1%YoY. The consolidated order backlog for the company stood at Rs43b as of September 2008 v/s Rs32b in September2007.? During 1HFY09, Thermax bagged the largest ever captive cogeneration plant order for Rs8.2b, which consists of 4x750 TPH (390MW) pulverized coal fired boilers. This is manufactured by Thermax under technology licence fromBabcock & Wilcox, USA.? Thermax recently signed a technical transfer license with Babcock & Wilcox Power Generation Group Inc. (B&WPGG), USA agreement that grants it the right to engineer, manufacture and sell sub critical B&W radiant utilityboilers up to 800MW in India for the next 15 years.? We expect Thermax to report consolidated net profit of Rs3.2b in FY09 and Rs3.5b in FY10. The stock trades at aP/E of 6.7x FY09E and 6.1x FY10E. Under Review.QUARTERLY PERFORMANCE (STANDALONE)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 6,581 7,701 8,454 9,221 7,725 7,907 10,255 12,419 32,042 38,306Change (%) 104.0 59.7 53.7 14.6 17.4 2.7 21.3 34.7 49.9 19.6EBITDA 680 1,011 1,049 1,270 864 799 1,217 1,646 4,096 4,527Change (%) 77.9 33.3 38.1 43.2 27.0 -20.9 16.0 29.6 47.6 10.5As of % Sales 10.3 13.1 12.4 13.8 11.2 10.1 11.9 13.3 12.8 11.8Depreciation 50 54 53 61 73 67 70 101 218 311Interest 4 2 3 4 3 8 8 -8 13 10Other Income 85 109 86 126 105 213 120 73 418 511Extra-ordinary Items 0 0 21 0 0 0 0 21 0PBT 809 1,063 1,080 1,352 894 937 1,259 1,626 4,304 4,717Tax 249 371 330 546 310 368 403 519 1,496 1,599Effective Tax Rate (%) 30.8 34.9 30.5 40.4 34.6 39.2 32.0 31.9 34.8 33.9Reported PAT 560 692 750 805 584 570 856 1,108 2,808 2,907Change (%) 4.3 -17.7 14.1 37.5 61.1 3.5Adj PAT 462 692 750 784 584 944 856 1,108 2,787 3,118Change (%) 67.9 18.9 35.3 19.6 26.3 36.4 14.1 41.2 44.2 11.9E: MOSL EstimatesSatyam Agarwal (Agarwals@MotilalOswal.com)Tel: +91 22 3982 5410/ Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)31 December 2008117

Results PreviewQUARTER ENDING DECEMBER 2008FMCGBSE Sensex: 9,647 S&P CNX: 2,959 31 December 2008COMPANY NAMEAsian PaintsBritannia IndustriesColgate PalmoliveDabur IndiaGSK ConsumerRobust consumer income helps sustain volume growthFMCG demand has held strong due to 18-20% increase in farm revenues and 30%increase in salaries of government employees who constitute 68% of the organizedwork force. Rural incomes have been strong owing to increasing jobs in construction,real estate and organized retail. While the decline in inflation to 6.8% and the commoditymeltdown are positives; we expect a decline in income growth of consumers in FY10,which could curtail volume growth. However, we rule out possible volume decline forthe industry.Godrej Consumer ProductsHindustan UnileverITCMaricoNestle IndiaTata TeaUnited SpiritsCrude-linked input prices benign; full benefits to flow in from 4QFY09Major crude-linked commodities like palm oil, HDPE (down ~60% off its peak) havefallen in line with crude, while others like LAB (down 30% off its peak) are expected tofollow with a lag. Prices of agri-commodities, nevertheless, have remained firm. Accrualof benefits would be partial in 3QFY09, as major consumers such as HUL and Godrejhad built their respective inventory at higher prices. Margin pressure of agri-productusers are expected to sustain as the price trend is unlikely to reverse in the near-term.Price increases behind us; price reductions/ sales promotions to followSharp increase in material prices forced price hikes of 5-20% across categories. However,subsiding margin pressures (on account of decline in crude-linked commodities) meanlittle chance of further price hikes; rather we expect price reduction in certain categorieslike Toilet Soaps, Detergents and increased focus on sales promotion in other categories.EXPECTED QUARTERLY PERFORMANCE SUMMARYRECO SALES EBITDA NET PROFIT(RS MILLION)DEC.08 CHG. (%) DEC.08 CHG. (%) DEC.08 CHG. (%)FMCGAsian Paints Buy 14,050 19.3 2,110 13.7 1,282 7.9Britannia Buy 8,000 21.9 690 17.3 538 10.2Colgate Buy 4,250 15.6 725 18.6 704 16.4Dabur Neutral 7,675 18.1 1,285 10.5 1,046 10.7Godrej Consumer Buy 3,260 19.5 620 9.1 500 16.2GSK Consumer Buy 3,041 7.0 350 -2.0 252 -8.5Hind. Unilever Neutral 45,421 23.2 7,083 25.5 6,386 15.3ITC Buy 41,560 20.2 13,810 15.1 9,481 14.1Marico Buy 6,350 25.4 740 15.2 480 12.3Nestle Buy 10,800 20.6 1,872 18.7 1,168 18.7Tata Tea Neutral 12,650 6.8 1,850 -12.4 700 -14.8United Spirits Buy 10,785 21.3 2,020 18.3 1,060 20.2Sector Aggregate 167,841 19.6 33,155 15.0 23,596 12.9Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com)Tel:+9122 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com)Tel:+9122 3982541831 December 2008118

FMCGWe expect heightened competition from small and regional players, which would forcelarge organized players to reduce prices. We expect aggressive sales promotion activitiesin the coming months.OutlookMaintain a selective approach; prefer companies with niche positioning/lowcompetitive intensity: We believe volume growth in categories of high penetration likeToilet Soaps and Detergents will remain muted. We expect increase in competition at thelower end as benign commodity prices will aid resurgence of local/regional players. Productcategories with lower penetration, high entry barriers and high consumer switching costswill drive growth. We rate United Spirits and Nestle as our preferred bets among largecaps, Marico and Godrej Consumer are our top picks in the mid-cap stream.Inflation decline, robust farm revenue, help sustain volumesConsumer staples demand remained largely unhurt in 3QFY09, as concerns over inflationsubsided before they could impact demand materially. Inflation peaked at 12.63% for theweek ended 9 August 2008 and declined to 6.8% presently. The recent 10% cut in petrolprices and 6% cut in diesel will reduce consumer expenses as also the product price,thereby boosting demand.WPI INDEX141210865-Apr19-Apr3-May17-May31-May14-Jun28-Jun12-Jul26-Jul9-Aug23-Aug6-Sep20-Sep4-Oct18-Oct1-Nov15-Nov29-Nov13-DecSource: BloombergFarm income is expected to increase by 18-20% due to 2.5-3% increase in crop outputand 15-18% increase in the minimum support price (MSP) of agri-products. This assumessignificance as 50% of rural income arises from agriculture and more than 57% of totalpopulation depends upon agriculture either directly or indirectly. In addition salariedgovernment employees, who account for more than two-thirds of the organized workforce, have received salary increases of more than 30%.31 December 2008119

FMCGIndustrial slowdown/ lower income growth to curb new consumer entryWe believe the current economic slowdown will have a lag effect on FMCG volumegrowth. We expect volume growth rates to moderate in the coming quarters, Howeverthere seems to be no case for decline in absolute volumes. Our expectation of lowervolume growth stems from reduction in incremental employment opportunities inconstruction, infrastructure and organized retail. In addition, farm revenue growth is unlikelyto exceed 10% versus 15-20% CAGR in the past three years. We expect weak consumersentiment leading to slower additions to the new consuming class in low penetrationcategories, and downtrading in categories where product differentiation is not high.Most of the FMCG companies had reported acceleration in volume growth in 1HFY09;we expect moderation in these rates. Our estimates factor in slower volume growth inmost of the product segments in 2HFY09.VOLUME GROWTH TRENDCOMPANY VOLUME GROWTH (%)3 YR CAGR FY08 1HFY09 FY09E FY10EAsian Paints (Standalone) 16.2 17.5 19.0 14.0 15.0Britannia Ind (Biscuits) 12.7 2.8 N.A 5.0 7.2Colgate (Toothpaste) 10.8 9.3 11.0 9.8 10.5Glaxo Smithkline* 8.0 7.7 15.1 11.0 8.0Godrej Consumer(Soaps) 11.0 3.3 N.A 5.0 8.0Hind. Unilever* 7.2 3.8 8.4 7.3 5.0ITC (Cigarettes) 4.8 -0.7 -2.5 -4.0 6.2Marico (Raw/Refined Oil) 13.6 15.1 N.A 11.0 12.0Nestle* 9.0 13.8 22.6 17.7 16.2Tata Tea (Standalone) 2.7 4.0 8.0 5.0 4.0United Spirits 33.7 12.9 17.0 11.6 11.7Source: Company/MOSLCrude-linked input prices decline sharply; full benefits to accrue from4QFY09Decline in crude prices has resulted in a similar trend in crude linked inputs. The pricedecline in palm oil and HDPE (down ~60% off its peak) has been in line with crude, otherslike LAB (down 30% off its peak) are expected to follow with a lag. However, the fullbenefits of these are expected to accrue in 4QFY09, as major consumers like HUL andGodrej had raw material inventory buildup at higher prices. We are revising our earningestimates for HUL to factor in decline in raw material prices.HINDUSTAN UNILEVER: REVISED EARNING ESTIMATES (RS M)OLD ESTIMATE REVISED ESTIMATE CHANGE (%)CY08E CY09E CY08E CY09E CY08E CY09ENet Sales 162,870 183,322 165,795 181,609 1.8 -0.9EBITDA 21,583 25,756 21,439 26,944 -0.7 4.6EBITDA Margin (%) 13.3 14.0 12.9 14.8EPS (Rs) 9.3 11 9.2 11.3 -1.4 3.0Source: Company/MOSL31 December 2008120

FMCGTREND IN PALM OIL PRICES (MALAYSIAN RINGGITS/'000 TON)4,6003,8003,0002,2001,400600Jan-06Sep-06May-07Jan-08Sep-08? End usage: Toilet Soaps? Major Users? HUL (6% of sales)? Godrej Consumer (22%of sales)? Y-o-Y Price decline: ~45%? YTD Price decline: ~62%? Soap Price Hikes: ~ 8-10% (6months)? Impact: PositiveTREND IN HDPE PRICES (US$/MT)2,0001,6501,300950600Nov-06Jan-07Mar-07May-07Jul-07Sep-07Nov-07Jan-08Mar-08May-08Jul-08Sep-08Nov-08? Major End Usage: PackagingMaterial? Major Users:? Dabur (~16% of Sales)? Colgate (~7% of Sales)? GSK Consumer (~9% ofSales)? Godrej Consumer (~10%of Sales)? HUL (~9% of Sales)? Marico (~8% of Sales)? Nestle (~8% of Sales)? Y-o-Y Price Decline: ~43%? YTD Price Decline: ~55%? Impact: PositiveSource: BloombergTREND IN LAB PRICES (RS/KG)135120105907560? End Usage: Detergents? Major Users:? HUL? Y-o-Y Price Decline: ~30%? YTD Price Decline: ~56%? Detergent Price Hikes: 20-25% (6 months)? Impact: PositiveMay-06Aug-06Nov-06Feb-07May-07Aug-07Nov-07Feb-08May-08Aug-08Nov-08Source: BloombergNon-crude commodities firm; trend expected to continueMost of the non-crude linked commodities have remained firm. Coffee, skimmed milkpowder, have seen a sharp decline in prices due to global linkages. Other products like31 December 2008121

FMCGsugar, wheat, milk, safflower and copra have remained firm. Lower production in sugar,copra and safflower has contributed to strong prices of agri-output. Wheat price has ruledfirm, as it is linked to the minimum support price in the domestic market and not to globalcommodity prices. We expect margin pressure to sustain. Copra and safflower prices areexpected to trend lower after 2-3 months, while wheat prices are expected to remain firm.SUGAR PRICE TREND (RS/QUINTAL)2,0001,9501,9001,8501,800Aug-08Aug-08Sep-08Sep-08Oct-08Oct-08Nov-08Nov-08Dec-08Dec-08? Major End Usage: Biscuits,Confectionary? Major Users:? Britannia (~8% of Sales)? Nestle (~2% of Sales)? Y-o-Y Price Increase: ~25%? YTD Price Increase: ~23%? Product Price Hikes:? Biscuits: 10-12%(6 months)? Confectionary: ~4%(6 months)? Impact: NegativeTREND IN SMP PRICES (RS/KG)1501301109070May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08? Major End Usage: MilkProducts and HFD? Major Users:? Nestle (~3.5% of Sales)? GSK Consumer (~13%of Sales)? Y-o-Y Price Decline: ~40%? YTD Price Increase: ~37%? Price Hikes:? Milk Products: ~5%(6 months)? HFD: ~0% (6 months)? Impact: PositiveTREND IN COPRA PRICES (RS/QUINTAL)5,0004,4503,9003,3502,800Feb-07Apr-07Jun-07Aug-07Oct-07Dec-07Feb-08Apr-08Jun-08Aug-08Oct-08Dec-08? Major End Usage: PureCoconut Oil? Major Users:? Marico? Y-o-Y Price Decline: ~20%? YTD Price Increase: ~19%? Price Hikes:? Pure Coconut Oil: ~8%(6 months)? Impact: NegativeSource: Cris-Infac/ MOSL31 December 2008122

FMCGTREND IN COFFEE PRICES (RS/QUINTAL)2,8002,3501,9001,4501,000? Major End Usage: InstantCoffee? Major Users:? Nestle (~5% of Sales)? HUL (~1.5% of Sales)? Y-o-Y Price Increase: ~9%? YTD Price Increase: ~43%? Impact: PositiveMay-06Sep-06Jan-07May-07Sep-07Jan-08May-08Sep-08TREND IN SAFFLOWER OIL PRICES (RS/MT)97,00084,00071,00058,00045,000Mar-07Jun-07Sep-07Dec-07Mar-08Jun-08Sep-08Dec-08? Major End Usage: Edible Oil? Major Users:? Marico? Y-o-Y Price Increase: ~35%? YTD Price Increase: ~33%? Price Hikes:? Saffola: ~10% (6months)? Impact: NegativeTREND IN WHEAT PRICES (RS/QUINTAL)1,2251,1501,0751,000925May-06Aug-06Nov-06Feb-07May-07Aug-07Nov-07Feb-08May-08Aug-08Nov-08? Major End Usage: Biscuits,Prepared Dishes and HFDl? Major Users:? Britannia (~18% ofSales)? GSK Consumer (~3% ofSales)? Y-o-Y Price Increase: ~5%? YTD Price Increase: ~1%· Price Hikes:? Biscuits: 10-12%(6 months)? GSK Consumer ~0%(6 months)? Likely Trend: Firm? Impact: NegativeSource: Cris-Infac/ MOSL31 December 2008123

FMCGIMPACT OF INPUT PRICE CHANGESINPUT PRICE TREND (Y-O-Y) UNIT 52 WEEK H/L CURRENT PRICE IMPACT COMPANIESLAB Down Rs/Kg 122/67 Rs.86/Kg Positive HULSoda Ash Up Stone 13000/9653 Rs.12300/Tonne Negative HULPalm Oil Down MYR/Tonne 3946/1507 MYR.1592/Tonne Positive HUL, Godrej ConsumerSugar Up Rs/Qtl 1923/1436 Rs.1923/Qtl Negative Nestle, GSK Cons ,ITC and BritanniaWheat Up Rs/Qtl 1158/1100 Rs1146/Qtl Negative Nestle, ITC and BritanniaMilk Up Index 230/216 230 (Index) Negative Nestle, GSK ConsumerCopra Up Rs/Qtl 4550/2990 Rs.4075/Qtl Negative MaricoSource: Company/MOSLCurrency fluctuations to dent growth for Tata TeaThere has been sharp fluctuation in global forex markets; this would impact the performanceof companies having significant exposure to international operations. Tata Tea would witnessa negative impact of the 12% depreciation of GBP v/s INR. However, Marico has takenforex cover at Rs39-40/US$ and hence would not benefit from the current depreciation.GBP/INR9085807570May-07Aug-07Nov-07Feb-08May-08Aug-08Nov-08Source: Company/MOSLSelect categories see sharp price increase: price reductions/salespromotions to followSharp increase in material prices forced price increases of 5-20% across categories. Theprice increases have been in both health and personal care (HPC) and foods. Companieshave used a mix of pack size reduction and actual price increases. Sharp increase incocoa prices has resulted in a 50% increase in prices of small packs of chocolates fromRs2 to Rs3. Detergents have witnessed a price increase YTD of more than 30% while inmost other products, the price increase has been in the range of 5-15%. We expectheightened competition from small and regional players, which would force large organizedplayers to reduce prices. We expect aggressive sales promotion activities in the comingmonths.31 December 2008124

FMCGPRICE INCREASE OF 5-15% ACROSS CATEGORIESPRODUCT BRAND SKU PRICE (RS) PRICENEW OLD NEW OLD INCREASE (%)Detergent Wheel Active Gold 600 gm 650 gm 20 20 33.3Surf Excel Blue 750 gm 750 gm 93 67 38.8Rin Advanced 1 Kg 70 54 29.6Toilet Soaps Lux 4*125gm 4*125gm 86 74 16.2Cinthol 90g 90g 23 22 5.0Personal care Fair & Lovely 30gm 30gm 34 33 3.0Clinic Shampoo 400ml 400ml 125 115 8.7Sunsilk 400ml 400ml 155 140 10.7Ponds Talc 300gm 300gm 93 84 10.7Oral Care Pepsodent 175gm 175gm 53 46 15.2Close Up 35gm 40gm 10 10 8.8Biscuits Tiger Plain 88 76 4 4 16.0Good Day Pista Badam 90 90 13 15 15.0Nice Time 100 86 10 10 16.0Maska Chaska 71 66 9 10 20.0Vita Marie Gold 71 68 8 8 4.0Cream Treat 100 90 10 10 11.0Foods Tazza 950gm 1kg 193 162 19.1Tata Tea 490gm 500g 119 111 9.4Source: Company/MOSLDynamic operating environment, prefer niche players with high entrybarriersWe expect dynamic changes in operating environment in the FMCG space. The changingscenario can result in a different set of growth trajectories in the forthcoming periods:1) We expect moderation in volume growth due to expected decline in disposable incomeof consumers in general and lower middle section of society in particular.2) We expect increased activity from the small scale sector in product segments whichhave seen a sharp decline in input costs. Segments such as Toilet Soap and Detergentsare likely to witness renewed activity from niche players to gain market share. Webelieve that regional and niche players have started aggressive marketing in smalltowns/ villages with lower prices. High margins would also attract new entrants intothe industry.3) We believe that large organized players would be forced to reduce prices due to 4%reduction in excise and sharp decline in input prices. We expect aggressive salespromotion schemes in an attempt to shore up volume growth.We believe volume growth in categories of high penetration like Toilet Soaps and Detergentswould remain muted. We expect competition to increase at the lower end as benigncommodity prices will aid resurgence of small/ local players. Products with lowerpenetration, high entry barriers and high consumer switching costs will drive growth. Werate United Spirits and Nestle as our preferred bets among large caps, Marico andGodrej Consumer are our top picks in the mid-cap stream.31 December 2008125

FMCGStock performance and valuationsSTOCK PERFORMANCE (%)ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARFMCGAsian Paints -24 -19 1 34 -16 -6Britannia -1 -10 24 42 7 2Colgate 1 0 26 53 9 13Dabur -7 -26 18 26 1 -14Godrej Consumer 27 2 52 54 35 14GSK -7 -22 18 30 1 -10Hind. Unilever -1 17 24 69 8 29ITC -9 -18 16 34 -1 -6Marico -5 -19 20 33 3 -7Nestle -14 -3 11 49 -6 9Tata Tea -10 -34 15 19 -2 -21United Spirits -29 -55 -4 -3 -21 -43RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)105SensexMOSL FMCG Index120MOSL FMCG IndexSensex951008580756065Sep-08 Oct-08 Nov-08 Dec-0840Dec-07 Mar-08 Jun-08 Sep-08 Dec-08COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EFMCGAsian Paints 895 Buy 43.5 49.9 57.7 20.6 17.9 15.5 12.9 11.0 9.1 42.5 38.5 35.9Britannia 1,325 Buy 84.5 91.3 118.8 15.7 14.5 11.2 12.3 10.0 7.3 26.7 24.0 25.7Colgate 408 Buy 17.0 20.1 23.4 23.9 20.3 17.4 23.4 20.2 17.1 104.6 152.6 147.9Dabur 84 Neutral 3.9 4.3 5.1 21.8 19.7 16.5 17.3 16.1 12.7 54.0 44.1 40.9Godrej Consumer 139 Buy 7.1 7.1 9.3 19.7 19.6 14.9 17.3 15.0 11.3 92.8 30.3 35.0GSK Consumer 573 Buy 38.7 43.0 52.9 14.8 13.3 10.8 9.0 8.6 6.5 25.2 24.3 25.3Hind. Unilever 250 Neutral 8.1 9.2 11.3 30.8 27.3 22.1 28.1 24.2 19.0 122.9 106.1 102.3ITC 171 Buy 8.3 9.0 10.4 20.7 19.1 16.5 13.9 12.2 10.5 25.9 24.5 24.7Marico 56 Buy 2.6 3.0 3.6 21.5 18.5 15.5 14.9 12.2 10.0 50.5 41.0 35.3Nestle 1,453 Buy 44.7 56.4 71.7 32.5 25.8 20.3 19.9 16.5 13.0 73.7 83.7 83.0Tata Tea 602 Neutral 46.9 50.9 66.6 12.8 11.8 9.0 4.5 4.5 3.5 8.1 8.1 10.0United Spirits 886 Buy 39.7 47.6 67.6 22.3 18.6 13.1 15.3 13.1 10.7 34.9 30.3 29.4Sector Aggregate 23.6 21.1 17.3 16.5 14.5 11.9 34.2 32.3 33.431 December 2008126

Results PreviewSECTOR: FMCG-PAINTSAsian PaintsSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGAPNT INREUTERS CODEASPN.BO31 December 2008Previous Recommendation: BuyBuyRs895Equity Shares (m) 95.952-Week Range 1,320/8301,6,12 Rel. Perf. (%) -5/6/34M.Cap. (Rs b) 85.8M.Cap. (US$ b) 1.8YEAR NET SALES ADJ. PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 36,700 2,864 29.9 30.1 30.0 11.0 36.8 49.2 2.3 18.03/08A 44,043 4,175 43.5 45.8 20.6 8.7 42.5 57.6 1.9 12.93/09E 54,229 4,785 49.9 14.6 17.9 6.9 38.5 55.1 1.6 11.03/10E 57,769 5,539 57.7 15.8 15.5 5.6 35.9 53.3 1.4 9.1? Asian Paints is expected to report net sales of Rs14b, a YoY growth of 19.3%. We expect EBITDA margin to decline80bp on account of higher cost of input materials. Adjusted PAT is expected to be up 8% YoY to Rs1.28b.? We expect lower volume growth in the current quarter due to higher trade inventory and impact of Diwali in theprevious quarter. Outlook is uncertain due to expected slowdown in domestic decorative business as new constructionaccounts for 25% of total paints demand. In addition, automotive paints volumes will suffer due to sharp decline inautomobile volumes in the past couple of months.? Industrial paints are expected to maintain momentum while slower growth in the auto sector could impact automotivepaints demand. The Middle East market is likely to report high double-digit growth in volumes.? We expect volume growth for FY09 to subside to 14% (19% for 1HFY09). The company has reduced prices by5.5% in the quarter due to decline in crude-linked input costs although titanium dioxide prices are still holding firm.? The stock is trading at 17.9x FY09E and 15.5x FY10E earnings. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 9,605 11,332 11,776 11,330 12,420 14,753 14,050 13,006 44,043 54,229Change (%) 23.6 13.5 25.9 18.2 29.3 30.2 19.3 14.8 20.0 23.1Total Expenditure 8,251 9,516 9,921 9,773 10,698 12,665 11,940 11,102 37,461 46,404EBITDA 1,354 1,816 1,856 1,557 1,722 2,088 2,110 1,904 6,582 7,825Margin (%) 14.1 16.0 15.8 13.7 13.9 14.2 15.0 14.6 14.9 14.4Change (%) 30.8 35.3 50.3 33.1 27.2 15.0 13.7 22.3 37.7 18.9Interest 49 69 54 39 55 68 58 35 212 216Depreciation 141 146 150 154 154 186 186 189 592 716Other Income 89 265 132 134 103 179 125 127 620 534Operational PBT 1,252 1,866 1,783 1,497 1,616 2,014 1,991 1,807 6,399 7,427Non Recurring Income 4 -67 -1 -21 -6 -9 45 100 -84 131PBT 1,256 1,798 1,783 1,476 1,610 2,005 2,036 1,907 6,314 7,558Tax 422 597 537 477 519 634 640 620 2,034 2,414Effective Tax Rate (%) 33.6 33.2 30.1 32.3 32.2 31.6 31.4 32.5 32.2 31.9PAT 834 1,202 1,246 999 1,091 1,370 1,396 1,287 4,281 5,144Minorrity Interest 15 63 58 54 29 55 69 75 189 228Adjusted PAT 815 1,206 1,189 966 1,068 1,324 1,282 1,112 4,176 4,785Change (%) 34.8 45.1 66.9 57.2 31.0 9.8 7.9 15.1 45.7 14.6E: MOSL EstimatesAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com)Tel:+9122 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com)Tel:+9122 3982541831 December 2008127

Results PreviewSECTOR: FMCGSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGBRIT INREUTERS CODEBRIT.BO31 December 2008Previous Recommendation: BuyBritannia IndustriesBuyRs1,325Equity Shares (m) 23.952-Week Range 1,650/9911,6,12 Rel. Perf. (%) 14/21/42M.Cap. (Rs b) 31.7M.Cap. (US$ b) 0.7YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 21,993 1,076 47.6 -22.2 27.8 5.1 18.5 18.7 1.3 22.003/08A 25,848 1,911 84.5 77.4 15.7 4.2 26.7 27.2 1.1 12.303/09E 31,567 2,151 91.3 8.1 14.5 3.5 24.0 27.1 0.9 10.003/10E 35,816 2,798 118.8 30.1 11.2 2.9 25.7 30.0 0.7 7.3? We expect Britannia to report net sales of Rs8b, 21.9% growth YoY. EBITDA margin is expected to decline 40bp.Higher tax rate (up 500bp) due to the base effect is expected to lead to lower adj. PAT growth of 10.2% to Rs538m.? EBITDA margin contraction is expected to be limited to 40bp, as the full benefit of the 5-12% price increase (a mixof actual price increase and pack size reductions) adopted by the company in the previous quarters would getaccounted.? We expect cost pressures to sustain as major inputs by value like Wheat (~31% of sales) and Sugar (~12% of sales)have remained firm. However, recent fall in vegetable oil prices (~20% of sales) would provide an uptick to marginsin the coming quarters.? We believe resolution of dispute between the Wadias and Danone and increase in payout ratio can also lead to stockre-rating. The stock trades at 14.5x FY09E EPS of Rs91.3 and 11.2x FY10E EPS of Rs118.8. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 5,769 6,588 6,564 6,928 6,933 8,385 8,000 8,248 25,848 31,567YoY Change (%) 19.5 19.8 15.7 15.6 20.2 27.3 21.9 19.1 17.5 22.1Total Exp 5,323 5,902 5,976 6,342 6,357 7,715 7,310 7,483 23,530 28,865EBITDA 446 686 588 586 576 671 690 765 2,318 2,702Margins (%) 7.7 10.4 9.0 8.5 8.3 8.0 8.6 9.3 9.0 8.6Depreciation 69 72 73 77 79 82 85 92 291 337Interest 5 29 30 14 35 44 30 17 97 126Other Income 108 58 63 266 79 167 65 47 502 359PBT 480 643 548 761 541 712 640 704 2,432 2,598Tax 88 127 60 138 83 116 102 146 413 447Rate (%) 18.3 19.8 10.9 18.1 15.3 16.2 15.9 20.8 17.0 17.2PAT 392 516 488 623 458 597 538 558 2,019 2,151YoY Change (%) 20.2 116.8 142.8 70.2 16.8 15.6 10.2 -10.4 18.4 6.5Extraordinary Expenses -31 -31 -34 -13 -55 -64 -25 5 -109 -139Reported PAT 361 485 454 610 403 533 513 563 1,911 2,012E: MOSL EstimatesAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com)Tel:+9122 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com)Tel:+9122 3982541831 December 2008128

Results PreviewSECTOR: FMCGSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGCLGT INREUTERS CODECOLG.BO31 December 2008Previous Recommendation: BuyColgate PalmoliveBuyRs408Equity Shares (m) 136.052-Week Range (Rs) 521/3411,6,12 Rel. Perf. (%) 0/43/53M.Cap. (Rs b) 55.5M.Cap. (US$ B) 1.1YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 12,951 1,518 11.2 16.1 36.6 160.9 55.0 54.5 3.3 28.303/08A 14,734 2,318 17.0 52.7 23.9 34.2 104.6 103.3 3.6 23.703/09E 17,002 2,732 20.1 17.9 20.3 28.4 152.6 150.0 3.1 20.403/10E 19,366 3,183 23.4 16.5 17.4 23.6 147.9 145.9 2.7 17.4? We expect Colgate to report YoY growth of 15.6% in net sales to 4.25b in 3QFY09. We expect 50bp increase inEBITDA margin as the benefits of lower packaging cost are accounted for.? We expect double-digit volume growth in toothpaste and toothbrushes. Industry interactions signal a sustainedmomentum in consumers converting from toothpowder usage to toothpaste; Colgate, being the market leader isexpected to benefit the most.? Raw materials remain a mixed bag, as the company would benefit from the decline in packaging material cost, whilecalcium carbonate has remained firm.? We expect Colgate to sustain growth in the current environment as it has a product portfolio catering to all segmentsin Oral Care.? The stock is trading at 20.3x FY09E EPS of Rs20.1 and 17.4x FY10E EPS of Rs23.4. high payout of 89% anddividend yield of 3.5% are a positive. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 3,507 3,639 3,675 3,913 4,076 4,125 4,250 4,551 14,734 17,002YoY Change (%) 13.3 13.7 14.0 14.0 16.2 13.4 15.6 16.3 13.8 15.4Total Exp 2,892 3,074 3,064 3,408 3,415 3,614 3,525 3,835 12,448 14,389EBITDA 614 564 611 506 661 512 725 716 2,286 2,614Margins (%) 17.5 15.5 16.6 12.9 16.2 12.4 17.1 15.7 15.5 15.4Depreciation 44 49 51 55 55 56 56 56 198 223Interest 3 6 2 3.6 4 5 5 6 14 20Other Income 210 196 228 214 312 270 240 202 848 1,024PBT 777 705 787 662 913 721 904 856 2,921 3,394Tax 158 158 182 105 194 86 200 182 603 662Rate (%) 20.3 22.4 23.2 15.9 21.3 11.9 22.1 21.2 20.7 19.5Adjusted PAT 619 547 605 556 719 635 704 674 2,318 2,732YoY Change (%) 71.6 8.3 20.1 11.6 16.2 16.0 16.4 21.2 52.7 17.9Reported PAT 609 547 605 556 719 635 704 674 2,318 2,732YoY Change (%) 68.8 136.2 20.1 9.9 18.1 16.0 16.4 21.2 44.6 17.9E: MOSL EstimatesAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com)Tel:+9122 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com)Tel:+9122 3982541831 December 2008129

Results PreviewSECTOR: FMCGSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGDABUR INREUTERS CODEDABU.BO31 December 2008Previous Recommendation: NeutralDabur IndiaNeutralRs84Equity Shares (m) 864.052-Week Range 127/601,6,12 Rel. Perf. (%) -3/35/26M.Cap. (Rs b) 72.6M.Cap. (US$ b) 1.5YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 20,431 2,269 3.3 24.5 25.6 15.1 58.8 52.0 3.6 20.803/08A 23,610 3,337 3.9 17.7 21.8 11.8 54.0 55.6 3.0 17.303/09E 27,969 3,683 4.3 10.5 19.7 8.7 44.1 46.9 2.6 16.103/10E 32,683 4,394 5.1 19.3 16.5 6.7 40.9 46.0 2.2 12.7? Dabur India is expected to report net sales of Rs7.7b in 3QFY09, an increase of 18.1% YoY. We expect 120bpdecline in EBITDA margin due to high raw material prices, losses in retail business and higher growth in low-marginoverseas subsidiaries. Adjusted PAT is estimated at Rs1.05b, a 10.7% growth YoY.? Volume growth is expected to be 10-11% (13% in 2QFY09), as the impact of 3-6% price increase (selective) in2QFY09 gets accounted. The company had increased prices by 10% in hair oil, 4% in oral care and 3% forChyawanprash.? Higher coconut oil and honey prices are expected to keep margins under pressure, though fall in packaging materialcost (~16% of net sales) would provide solace.? Babool is expected to report growth above mid-teens, as the company has improved the consumer value propositionby reverting to the Rs10 price point. Gulabari sales have been strong despite a weak winter. Dabur is expected tolaunch its latest innovation in Hair Care, Dabur Total Protect, a shampoo positioned against Clinic Plus of HUL.? Dabur has acquired Fem Care for Rs2.4b. This acquisition will increase Dabur’s presence in Skin Care. Although theacquisition appears costly at 3x sales; it is expected to boost FY10 EPS by 2% only (loss of income on surplus funds).? The stock is trading at 19.7x FY09E EPS of Rs4.3 and 16.5x FY10E EPS of Rs5.1. Maintain Neutral.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 5,208 5,841 6,497 6,065 6,040 6,912 7,675 7,342 23,610 27,969YoY Change (%) 33.0 5.4 14.7 14.3 16.0 18.3 18.1 21.1 15.6 18.5Total Exp 4,416 4,682 5,334 5,087 5,168 5,664 6,390 6,205 19,517 23,427EBITDA 792 1,160 1,163 978 871 1,248 1,285 1,137 4,093 4,542Margins (%) 15.2 19.9 17.9 16.1 14.4 18.1 16.7 15.5 17.3 16.2Depreciation 102 98 105 117 117 123 140 172 421 552Interest 47 42 44 35 40 40 35 23 168 137Other Income 77 76 49 138 120 145 100 64 340 428PBT 721 1,096 1,064 964 834 1,230 1,210 1,006 3,844 4,281Tax 100 139 139 131 127 156 170 157 507 610Rate (%) 13.9 12.7 13.0 13.6 15.2 12.7 14.0 15.6 13.2 14.3Minority Interest -1 -8 -20 29 1 -4 -6 5 -1 -4Adjusted PAT 622 966 945 804 707 1,078 1,046 844 3,337 3,675YoY Change (%) 29.0 29.6 19.2 4.5 13.5 11.6 10.7 5.0 17.9 10.1Extraordinary Inc/(Exp) 0 0 0 8 0 0 0 0 10 0Reported PAT 622 966 945 796 707 1,078 1,046 844 3,327 3,675E: MOSL EstimatesAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com)Tel:+9122 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com)Tel:+9122 3982541831 December 2008130

Results PreviewSECTOR: FMCGSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGSKB INREUTERS CODEGLSM.BO31 December 2008Previous Recommendation: BuyGlaxoSmithKline ConsumerBuyRs573Equity Shares (m) 42.152-Week Range (Rs) 766/4801,6,12 Rel. Perf. (%) 8/19/30M.Cap. (Rs b) 24.1M.Cap. (US$ b) 0.5YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA12/06A 11,079 1,270 30.2 19.5 19.0 4.4 23.4 35.8 1.9 11.612/07A 12,778 1,626 38.7 28.1 14.8 3.7 25.2 38.6 1.6 9.012/08E 15,135 1,810 43.0 11.3 13.3 3.2 24.3 37.3 1.3 8.612/09E 17,116 2,225 52.9 23.0 10.8 2.7 25.3 38.7 1.1 6.5? We expect GSK Consumer to report net sales of Rs3b, up YoY 7%. EBITDA margin is expected to decline 110bpdue to rising input costs and no price increases in the past six months. Adjusted PAT is expected to decline 8.5% toRs252m.? Volume growth is expected to trend lower QoQ on account of year-end inventory de-stocking as well as decline involume growth due to slowdown. Success of Dabur and HUL would be a key factor to watch in this productsegment.? Raw material pressures remain a mixed bag as barley (input for Malt) has declined by ~25% from its peak, whileLiquid milk has increased ~7%. We believe margins would remain under stress, as the company has not taken anyprice increases on account of the rising competition (from Dabur and HUL).? GSK Consumer is expected to rollout out new products targeting the bottom of the pyramid in the coming twoquarters. The company also holds cash/share of ~Rs125/share. The stock is trading at 13.3x CY08E EPS of Rs43and 10.8x CY09E EPS of Rs52.9. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E DECEMBER CY07 CY08 CY07 CY08E1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QENet Sales 3,265 3,156 3,516 2,841 4,106 3,764 4,225 3,041 12,778 15,135YoY Change (%) 17.9 17.8 16.6 7.3 25.8 19.3 20.2 7.0 14.9 18.4Total Exp 2,641 2,571 2,839 2,484 3,309 3,218 3,594 2,691 10,535 12,811EBITDA 624 585 677 357 797 546 631 350 2,243 2,324Margins (%) 19.1 18.5 19.3 12.6 19.4 14.5 14.9 11.5 17.6 15.4Depreciation 108 109 111 108 106 102 104 135 435 448Interest 11 11 12 12 13 13 14 15 46 55Other Income 139 166 209 175 186 262 265 187 689 899PBT 644 631 763 412 864 692 778 387 2,451 2,720Tax 221 208 258 137 298 231 247 135 824 911Rate (%) 34.3 33.0 33.8 33.3 34.0 33.3 33.0 34.9 33.6 33.5PAT 423 423 505 275 566 462 530 252 1,626 1,810YoY Change (%) 22.8 36.8 39.4 9.1 33.8 9.1 5.0 -8.5 28.4 11.3E: MOSL EstimatesAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com)Tel:+9122 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com)Tel:+9122 3982541831 December 2008131

Results PreviewSECTOR: FMCGSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGGCPL INREUTERS CODEGOCP.BO31 December 2008Previous Recommendation: BuyGodrej Consumer ProductsBuyRs139Equity Shares (m) 258.152-Week Range 146/941,6,12 Rel. Perf. (%) 13/31/54M.Cap. (Rs b) 35.9M.Cap. (US$ b) 0.7YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 9,515 1,342 5.9 12.5 23.4 29.4 110.0 64.8 3.4 18.203/08A 11,040 1,592 7.1 18.6 19.7 20.9 92.8 64.4 3.0 15.203/09E 13,395 1,833 7.1 0.8 19.6 5.9 30.3 30.4 2.5 15.003/10E 14,959 2,407 9.3 31.3 14.9 5.2 35.0 34.9 2.2 11.3*Equity capital for EPS calculation in FY09-10E is Rs258m (Post rights)? We expect GCPL to report net sales of Rs3.3b, implying a YoY growth of 19.5%. EBITDA margin is expected todecline 180bp YoY, (750bp up QoQ) as the benefits of decline in Palm oil prices get accounted. Adj. PAT is expectedto grow 34% YoY to Rs498m.? GCPL will gain from 6-8% increase in soap prices and 60% decline in Palm oil prices (60% of sales). GCPL’s profitmargins are expected to further improve from 4QFY09 as the high-cost raw material inventory of palm oil will getexhausted.? Gains from 11% increase in hair dye prices would be back ended as it has increased retail margins by 5%. Launch ofnew variants and higher retail margins are expected to improve margins after a lag of 2-3 quarters.? Depreciation of GBP v/s INR would result in muted performance from Keyline, as against robust performance in thepast two quarters. Kinky integration issues have been sorted out and performance is expected to improve QoQ.? The stock is trading at 19.6x FY09E EPS of Rs7.1 and 14.9x FY10E EPS of Rs9.3. High dividend yield of ~3.5% andlow P/E make the stock attractive at current levels. Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 2,863 2,740 2,728 2,718 3,616 3,465 3,260 3,054 11,026 13,395YoY Change (%) 20.5 18.2 14.6 12.1 26.3 26.4 19.5 12.4 36.2 21.5Total Exp 2,352 2,239 2,159 2,151 3,121 3,068 2,640 2,301 8,881 11,129EBITDA 511 501 568 567 496 397 620 753 2,145 2,266Margins (%) 17.9 18.3 20.8 20.9 13.7 11.5 19.0 24.7 19.5 16.9Depreciation 44 46 48 43 55 46 54 61 182 217Interest 35 32 29 34 -12 -47 -30 -24 129 -113Other Income 13 14 15 -1 35 31 14 1 40 81PBT 445 437 506 489 487 428 610 717 1,875 2,243Tax 59 67 76 81 96 81 110 123 283 410Rate (%) 13.1 15.2 15.0 16.6 19.7 18.9 18.0 17.1 15.1 18.3PAT 386 371 430 408 391 347 500 595 1,592 1,833YoY Change (%) 17.7 19.5 8.7 32.6 1.2 -10.1 34.9 38.2 12.5 15.1Reported PAT 386 371 430 408 391 347 500 595 1,592 1,833E: MOSL EstimatesAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com)Tel:+9122 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com)Tel:+9122 3982541831 December 2008132

Results PreviewSECTOR: FMCGSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGHUVR INREUTERS CODEHLL.BO31 December 2008Previous Recommendation: NeutralHindustan UnileverNeutralRs250Equity Shares (m) 2,177.552-Week Range 267/1701,6,12 Rel. Perf. (%) 0/50/69M.Cap. (Rs b) 544.9M.Cap. (US$ b) 11.2YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA12/06A 121,034 15,397 7.0 17.5 35.9 20.3 56.5 67.0 4.3 31.812/07A 137,178 17,691 8.1 16.4 30.8 37.9 122.9 144.7 3.9 28.112/08E 165,795 19,950 9.2 12.8 27.3 29.0 106.1 129.2 3.1 24.212/09E 181,609 24,664 11.3 23.6 22.1 22.6 102.3 125.1 2.8 19.0? We expect HUL to report 23.2% YoY increase in sales for 4QCY08 to Rs45.4b. EBITDA margin is expected toincrease 30bp to 15.6%. Lower tax rate for the quarter is expected to result in 15.3% increase in adjusted PAT? We expect volume growth to decline to ~5.5% (8.3% in 4QCY07 and 6.8% in 3QCY08). Sharp price increase ofmore than 30% in detergents (past 12 months) and decline in volume growth in the soaps industry. Personal Carevolume growth will be lower due to base effect (closure of the Assam-based factory). Further, muted onset of winterwould lead to lower sales of skin creams.? Margin is expected to expand 20bp on the back of a decline in crude-based raw materials. However, the full benefitof the decline would accrue in the next quarter, as the company has booked inventory at higher prices.? We expect the company to partially pass on the benefit of 4% decline in excise duty and lower raw material cost tothe consumers. We expect higher sales promotion/discounts initially but price cuts in competitive segments like ToiletSoaps and Detergents cannot be ruled out.? The stock is currently trading at 27.3x CY08E earnings and 22.1x CY09E earnings. We maintain Neutral.QUARTERLY PERFORMANCE(RS MILLION)Y/E DECEMBER CY07 CY08 CY07 CY08E1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QENet Sales (incl service inc) 31,843 34,814 33,646 36,874 37,939 42,157 40,279 45,421 137,178 165,795YoY Change (%) 13.8 12.9 9.7 16.8 19.1 21.1 19.7 23.2 13.3 20.9Total Expenditure 28,224 29,801 29,170 31,232 33,861 36,642 35,516 38,338 118,321 144,356EBITDA 3,620 5,013 4,476 5,642 4,078 5,515 4,763 7,083 18,857 21,439YoY Change (%) 9.5 20.9 11.1 12.8 12.7 10.0 6.4 25.5 14.4 13.7Margins (%) 11.4 14.4 13.3 15.3 10.7 13.1 11.8 15.6 13.7 12.9Depreciation 329 333 353 369 363 379 393 388 1,384 1,523Interest 51 110 68 26 35 87 0 128 255 250Other Income 908 1,058 1,059 1,597 1,009 1,647 1,239 1,426 4,627 5,321PBT 4,147 5,628 5,114 6,844 4,689 6,695 5,610 7,993 21,845 24,988Tax 809 1,111 1,021 1,305 905 1,294 1,231 1,608 4,155 5,037Rate (%) 19.5 19.7 20.0 19.1 19.3 19.3 21.9 20.1 19.0 20.2Adjusted PAT 3,339 4,517 4,093 5,540 3,784 5,401 4,379 6,386 17,691 19,950YoY Change (%) 13.6 19.1 6.9 14.6 13.3 19.6 7.0 15.3 14.9 12.8Extraordinary Inc/(Exp) 590 414 -12 775 25 180 1,087 0 1,564 1,293Reported Profit 3,929 4,931 4,081 6,314 3,810 5,582 5,466 6,386 19,255 21,243YoY Change (%) -11.3 29.6 -21.6 23.5 -3.0 13.2 34.0 1.1 3.8 10.3E: MOSL EstimatesAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com)Tel:+9122 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com)Tel:+9122 3982541831 December 2008133

Results PreviewSECTOR: FMCGSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGITC INREUTERS CODEITC.BO31 December 2008Previous Recommendation: BuyITCBuyRs171Equity Shares (m) 3,762.252-Week Range 239/1321,6,12 Rel. Perf. (%) -7/20/34M.Cap. (Rs b) 645.0M.Cap. (US$ b) 13.3YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 121,643 27,000 7.2 13.2 23.9 6.2 25.9 35.4 5.0 15.303/08A 139,475 31,201 8.3 15.6 20.7 5.3 25.9 35.8 4.4 13.903/09E 166,787 33,695 9.0 8.0 19.1 4.7 24.5 34.4 3.6 12.203/10E 202,151 39,070 10.4 16.0 16.5 4.1 24.7 35.1 2.9 10.5? We expect ITC to post 20.2% YoY growth in revenue in 3QFY09 to Rs41.6b. EBITDA margin is expected to declineby 150bp YoY to 33.2%, though registering a 250bp increase QoQ. PAT is expected to increase by 14.1% to Rs9.5b.? We expect cigarette volumes to decline by 2%, lower than 2.5% decline in 1HFY09 due to higher-than-expectedconversion from non-filters. Full impact of price increases will provide ~200bp margin expansion in 3QFY09.? We expect the Hotels business to report decline in sales and PBIT on account of the impact of the Mumbai terroristattacks as well as the general slowdown in the tourism industry.? New FMCG losses are expected to decline, as the company benefits from the decline in Palm oil price, a keyingredient in Toilet soaps. Palm oil prices have fallen off their peak of ~MYR4,200/MT to the current ~MYR1,600/MT.? Paper and Paperboard division will gain from stabilization of the pulp facility (1.22lakh ton) although increase in inputcosts in previous quarters will limit gains. We expect margin expansion in forthcoming quarters due to full benefitsfrom the pulp facility, stabilization of the paper unit and decline in input costs.? The stock is currently trading at 19.1x FY09E earnings and 16.5x FY10E earnings. We maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 33,252 32,734 34,580 39,344 38,997 37,633 41,560 48,597 139,475 166,787YoY Change (%) 16.7 13.4 11.0 13.5 17.3 15.0 20.2 23.5 14.7 19.6Total Exp 21,977 22,414 22,583 28,897 27,726 26,473 27,750 35,491 95,436 117,440EBITDA 11,276 10,320 11,997 10,447 11,271 11,160 13,810 13,106 44,039 49,347Margins (%) 33.9 31.5 34.7 26.6 28.9 29.7 33.2 27.0 31.6 29.6Depreciation 1,010 1,062 1,097 1,215 1,261 1,340 1,350 1,383 4,385 5,334Interest -8 9 18 27 14 28 29 29 46 100Other Income 1,016 2,083 1,374 1,637 1,144 2,098 1,250 1,002 6,109 5,494PBT 11,289 11,331 12,256 10,842 11,140 11,890 13,681 12,696 45,718 49,407Tax 3,461 3,623 3,948 3,485 3,653 3,864 4,200 3,995 14,517 15,711Rate (%) 30.7 32.0 32.2 32.1 32.8 32.5 30.7 31.5 31.8 31.8Reported PAT 7,829 7,709 8,307 7,357 7,487 8,027 9,481 8,701 31,201 33,695YoY Change (%) 20.0 13.4 15.8 13.1 -4.4 4.1 14.1 18.3 15.4 8.0Adjusted PAT 7,829 7,709 8,307 7,357 7,487 8,027 9,481 8,701 31,201 33,695YoY Change (%) 20.0 13.4 15.8 13.1 -4.4 4.1 14.1 18.3 15.6 8.0E: MOSL EstimatesAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com)Tel:+9122 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com)Tel:+9122 3982541831 December 2008134

Results PreviewSECTOR: FMCGSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGMRCO INREUTERS CODEMRCO.BO31 December 2008Previous Recommendation: BuyMaricoBuyRs56Equity Shares (m) 609.052-Week Range 83/471,6,12 Rel. Perf. (%) -2/33/33M.Cap. (Rs b) 33.8M.Cap. (US$ b) 0.7YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 15,569 989 1.6 -10.8 34.6 17.6 51.4 36.1 2.3 18.103/08A 19,067 1,589 2.6 60.6 21.5 10.8 50.5 33.5 1.9 14.903/09E 24,410 1,851 3.0 16.5 18.5 7.5 41.0 34.4 1.5 12.203/10E 26,115 2,202 3.6 19.0 15.5 5.4 35.3 37.5 1.3 10.0? Marico is expected to report net sales of Rs6.35b (increase of 25.4% YoY). EBITDA margin is expected to declineby 100bp, while adjusted PAT is expected to report growth of 12.3% to reach Rs480m.? We expect domestic volume growth to decline on a QoQ basis. Parachute has seen a shift toward small packs andSaffola is witnessing pressure, as the price of safflower oil (input for Saffola) are firm relative to sharp decline inprices of other oils. Marico has introduced a price-off of 10% in select variants of Saffola.? Prices of key raw material - Copra and Safflower Oil - continue to remain firm on a YoY basis and are expected todecline by 1QFY10. We believe margins for Marico would remain under pressure for 2HFY09 and bounce back inFY10.? International businesses are expected to record steady growth on account of strong growth in Bangladesh andstabilization of new distribution in Egypt. In addition, the company would also benefit from rupee depreciation againstthe Egyptian Pound and Bangladesh’s taka by 10-12%.? The stock is trading at 18.5x FY09E EPS of Rs3 and 15.5x FY10E EPS of Rs3.6. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 4,691 4,638 5,062 4,675 6,009 6,035 6,350 6,016 19,067 24,410YoY Change (%) 25.8 22.7 23.7 17.8 28.1 30.1 25.4 28.7 22.5 28.0Total Exp 4,031 3,990 4,420 4,220 5,253 5,296 5,610 5,316 16,603 21,474EBITDA 660 648 643 456 757 739 740 700 2,464 2,935Margins (%) 14.1 14.0 12.7 9.7 12.6 12.2 11.7 11.6 12.9 12.0Depreciation 58 64 66 79 75 82 90 99 309 346Interest 71 65 68 73 80 87 90 107 277 364Other Income 7 5 3 37 10 12 40 55 67 117PBT 539 523 511 341 612 583 600 548 1,945 2,343Tax 136 101 83 39 149 111 120 111 360 492Rate (%) 25.3 19.3 16.3 11.4 24.4 19.1 20.0 20.3 18.5 21.0Adjusted PAT 402 423 428 302 463 471 480 436 1,586 1,851YoY Change (%) 32.9 38.0 54.4 -2.4 15.1 11.6 12.3 44.6 60.4 16.7Exceptional Items 0 0 31 106 0 0 0 0 106 0Reported PAT 402 423 459 408 463 471 480 436 1,692 1,851E: MOSL EstimatesAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com)Tel:+9122 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com)Tel:+9122 3982541831 December 2008135

Results PreviewSECTOR: FMCGSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGNEST INREUTERS CODENEST.BO31 December 2008Previous Recommendation: BuyNestle IndiaBuyRs1,453Equity Shares (m) 96.452-Week Range 1,880/12001,6,12 Rel. Perf. (%) -2/17/49M.Cap. (Rs b) 140.1M.Cap. (US$ b) 2.9YEAR NET SALES PAT* EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA12/06A 28,161 3,300 34.2 0.3 42.4 23.1 54.3 79.5 4.9 25.612/07A 35,044 4,313 44.7 30.7 32.5 23.9 73.7 110.0 4.0 19.912/08E 43,141 5,436 56.4 26.0 25.8 21.6 83.7 119.3 3.2 16.512/09E 51,555 6,915 71.7 27.2 20.3 16.8 83.0 118.2 2.7 13.0* Excluding extraordinary items and provisions? Nestle is expected to report net sales of Rs10.8b, a 20.6% YoY growth in 4QCY08. EBITDA margin is expected todecline marginally by 40bp due to input cost pressures, while adjusted PAT is expected to increase 18.7% YoY toRs1.17b.? We expect Milk & Milk Products and Prepared Dishes & Culinary to report strong growth on the back of recentlaunches and sustained pick-up in Noodles.? The company has taken significant price increases in low-priced SKUs of Chocolates (SKUs of Rs2 increased toRs3), which will reflect in lower sales growth in the current quarter.? On raw material front, while Sugar prices have remained firm, the company is expected to benefit from the declinein Skimmed Milk Powder (down 45% from its peak in June 2008) and Coffee (down 10% YoY).? We believe strong support of parent’s R&D and strong brands provides Nestle with pricing power and consumerstickiness. The stock is trading at 26x CY08E EPS of Rs56.4 and 20.3x CY09E EPS of Rs71.7. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E DECEMBER CY07 CY08 CY07 CY08E1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QENet Sales 8,631 8,389 9,067 8,957 10,909 10,356 11,076 10,800 35,044 43,141YoY Change (%) 27.7 23.2 25.5 21.7 26.4 23.5 22.2 20.6 24.4 23.1Total Exp 6,843 6,743 7,129 7,380 8,419 8,406 9,004 8,928 28,081 34,757EBITDA 1,788 1,646 1,938 1,576 2,490 1,950 2,072 1,872 6,963 8,384Margins (%) 20.7 19.6 21.4 17.6 22.8 18.8 18.7 17.3 19.9 19.4Depreciation 179 178 184 206 211 224 233 241 747 907Interest 1.9 3.7 0.7 2.2 0.9 13.8 0.7 0.6 9 16Other Income 70 32 57 97 63 67 82 93 254 304PBT 1,677 1,496 1,810 1,465 2,341 1,780 1,921 1,723 6,461 7,765Tax 563 507 597 481 640 538 596 556 2,148 2,330Rate (%) 33.6 33.9 33.0 32.8 27.3 30.2 31.0 32.2 33.2 30.0Adjusted PAT 1,114 989 1,213 984 1,701 1,242 1,325 1,168 4,313 5,436YoY Change (%) 52.1 33.2 39.1 24.1 52.7 25.6 9.3 18.7 31.9 26.0Extraordinary Inc/(Exp) -30 -32 -52 -48 -100 -31 -14 -41 -175 -185Reported PAT 1,085 957 1,161 936 1,601 1,211 1,311 1,127 4,138 5,250YoY Change (%) 22.4 30.1 39.8 50.0 47.6 26.5 13.0 20.4 31.3 26.9E: MOSL EstimatesAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com)Tel:+9122 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com)Tel:+9122 3982541831 December 2008136

Results PreviewSECTOR: FMCGSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGTT INREUTERS CODETTTE.BO31 December 2008Previous Recommendation: BuyTata TeaBuyRs602Equity Shares (m) 61.852-Week Range 1,014/4301,6,12 Rel. Perf. (%) 8/9/19M.Cap. (Rs b) 37.2M.Cap. (US$ b) 0.8YEAR NET SALES PAT* EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 40,446 2,710 43.8 -7.2 13.7 1.6 12.5 11.7 1.8 10.53/08A 43,923 2,898 46.9 7.0 12.8 1.0 8.1 11.5 0.7 4.53/09E 48,533 4,519 50.9 8.7 11.8 1.0 8.1 13.6 0.6 4.53/10E 52,290 4,120 66.6 30.8 9.0 0.9 10.0 15.1 0.5 3.5? Net sales for the quarter is expected to increase 6.8% YoY to 12.65b, while EBITDA margin is expected to decline280bp due to higher tea prices. Despite the higher other income and lower tax rate, adjusted PAT is expected todecline 14.8% YoY.? Domestic branded sales are expected to remain robust, with volume growth at 8-10%. The company has taken aprice hike 8-10% during the last six months, though the same has been insufficient to ward off the impact of rising teaprices.? Tata Tetley is expected to report flat sales as the 3-4% growth could be overshadowed by the ~13% depreciation inGBP-INR. GBP-INR currently trades at 71.8 (80 in December 2007). We believe any Tata Tetley sales growthcould be adversely impacted going forward if current rates sustain.? The stock trades at 11.8x FY09E EPS of Rs50.9 and 9x FY10E EPS of Rs66.6. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q* 1Q 2Q 3QE 4QENet Sales 10,107 10,548 11,849 11,768 11,347 12,003 12,650 12,533 43,923 48,533YoY Change (%) 26.5 8.3 6.5 1.5 12.3 13.8 6.8 6.5 8.6 10.5Total Exp 8,502 8,955 9,643 10,153 9,809 10,568 10,800 11,066 36,821 42,244EBITDA 1,606 1,594 2,112 1,615 1,538 1,435 1,850 1,467 7,102 6,290Margins (%) 15.9 15.1 17.8 13.7 13.6 12.0 14.6 11.7 16.2 13.0Depreciation 236 217 227 235 222 221 230 250 916 923Interest 918 632 504 118 109 154 660 1,227 2,214 2,150Other Income 86 268 47 59 74 281 640 1,757 397 2,752PBT 538 1,013 1,427 1,322 1,280 1,341 1,600 1,747 4,369 5,969Tax 134 298 503 594 440 402 650 477 1,534 1,970Rate (%) 25.0 29.4 35.2 44.9 34.4 30.0 40.6 27.3 35.1 33.0PAT 404 715 924 728 840 939 950 1,270 2,835 3,999YoY Change (%) -52.7 -41.1 81.8 158.8 108.1 31.4 2.8 74.4 7.9 41.1Minority Interest/ Share of Associate -50 132 -103 -46 -97 -117 -250 -386 63 -850Adjusted PAT 353 847 821 682 743 822 700 884 2,898 3,149YoY Change (%) -56.9 -33.4 96.6 237.4 110.3 -2.9 -14.8 29.7 7.0 8.7Extraordinary Gains 86 -33 15,723 448 14 1,356 0 0 16,160 1,370Reported PAT 439 813 13,073 1,130 757 2,178 700 884 19,059 4,519YoY Change (%) -48 -58 1,016 123.7 72.4 167.7 -94.6 -21.7 316.1 -76.3E: MOSL Estimates; * 4QFY08 sales show adjustment for previous quarters due to sale of north India plantationsAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com)Tel:+9122 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com)Tel:+9122 3982541831 December 2008137

Results PreviewSECTOR: FMCGSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGUNSP INREUTERS CODEUNSP.BO31 December 2008Previous Recommendation: BuyUnited SpiritsBuyRs886Equity Shares (m) 107.952-Week Range 2,160/6061,6,12 Rel. Perf. (%) -1/0/-3M.Cap. (Rs b) 95.7M.Cap. (US$ b) 2.0YEAR NET SALES PAT* EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 27,205 2,542 27.8 576.3 31.9 6.8 18.9 17.3 2.9 17.703/08A 46,593 3,547 39.7 42.8 22.3 9.5 34.9 31.5 2.6 12.903/09E 55,264 4,250 47.6 19.8 18.6 7.1 30.3 31.9 2.2 11.103/10E 61,813 6,032 67.6 42.0 13.1 5.4 29.4 34.8 1.8 9.0* Excluding extraordinary items and provisions? We expect United Spirits to report net sales of Rs10.8b (up 21.3%). EBITDA margin is expected to contract 50bp to18.7%, while adjusted PAT is expected to grow by 20.2% to Rs1.06b.? We expect volume growth to be 12-13%, while product mix changes and price increases will account for the remainder.United Spirits has gained in an inflationary environment in the premium segment, as the low-priced spirits have seensharp price increase due to input cost inflation. Volume outlook for IMFL appears robust owing to the benefits of aneasing regulatory environment? The company is expected to benefit from the recent decline in prices of key inputs such as Molasses (although still upQoQ) and ENA prices (down from Rs37 to Rs25/liter). Further, glass prices (24% of sales) are expected to declinedue to the fall in prices of chemicals and oil. We expect margin expansion of 50bp to 20.1% in FY10.? We are positive with regard to the demography-led volume growth story in the Indian liquor industry. We believeUnited Spirits continues to be best bet in the liquor space in India. The stock is trading at 18.6xFY09E EPS and 13.1xFY10E EPS. We rate the stock our top pick in the consumer space.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08* FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 7,657 7,526 8,890 7,590 10,134 9,020 10,785 9,242 31,663 39,182YoY Change (%) 16.9 19.1 15.3 15.9 32.3 19.9 21.3 21.8 16.4 23.7Total Exp 5,943 6,047 7,182 6,237 7,982 7,230 8,765 7,528 25,359 31,505EBITDA 1,714 1,479 1,708 1,353 2,152 1,790 2,020 1,714 6,304 7,677Margins (%) 22.4 19.6 19.2 17.8 21.2 19.8 18.7 18.5 19.9 19.6Depreciation 70 72 90 85 82 87 90 101 317 360Interest 292 328 328 329 341 395 370 300 1,276 1,406PBT From operations 1,352 1,079 1,290 939 1,729 1,308 1,560 1,313 4,711 5,910Other income 49 112 96 107 72 125 100 100 294 397PBT 1,400 1,191 1,386 1,047 1,801 1,433 1,660 1,413 5,004 6,307Tax 505 389 505 396 630 494 600 493 1,794 2,216Rate (%) 36.0 32.7 36.4 37.8 35.0 34.5 36.1 34.9 35.8 35.1PAT 896 802 882 651 1,171 939 1,060 920 3,211 4,091YoY Change (%) 98.5 42.5 14.7 14.1 30.8 17.0 20.2 41.4 39 27.4Reported PAT 896 802 882 651 1,171 939 1,060 920 3,211 4,091E: MOSL Estimates; * FY08 numbers does not include benefits of Shaw Wallace mergerAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com)Tel:+9122 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com)Tel:+9122 3982541831 December 2008138

Results PreviewQUARTER ENDING DECEMBER 2008Information TechnologyBSE Sensex: 9,647 S&P CNX: 2,959 31 December 2008COMPANY NAMEHCL TechnologiesInfosysMphasiSPatni ComputerSatyam ComputerTCSTech MahindraWiproDecember 2008 quarter – A watershed in Indian IT’s historySeptember-December will be remembered as a watershed quarter on account of thefollowing reasons:a) TCS’s acquisition of Citigroup Global Services (CGSL) for US$505m along with acontract valued at US$2.5b over 9.5 years – the largest contract in the history ofIndian IT.b) HCL Technologies’ successful acquisition of Axon Plc for ~US$701m – the largestby any Indian IT company till date.c) Satyam Computer’s loss of credibility because of its attempt to acquire groupcompanies – Maytas Properties and Maytas Infra – controlled by Satyam’s promotersand friends and into totally unrelated businesses of real estate, infrastructure andconstruction for a total cash consideration of US$1.6b. The decision to acquire wastaken back after institutional investors protestedd) Infosys for first time ever in a decade (or last 40 quarters) will show negativesequential growth, all other frontline IT companies are also expected to show degrowthduring the quarter.Downgrading FY10 US$ revenue estimates to factor in lower demand forIT services and ~17% GBP & ~13% euro depreciationThe global business environment has significantly deteriorated during the quarter withthe US going in recession along with some of other major IT spending economies likeUK, Germany, Japan, Hong Kong, and Italy. Gartner also has lowered its Global 2009 ITspending forecast to 2.3%, down from an earlier projection of 5.8%. Demand outlookfor FY10 IT spending is quite uncertain due to the global economic slowdown.EXPECTED QUARTERLY PERFORMANCE SUMMARYRECO SALES EBITDA NET PROFIT(RS MILLION)DEC.08 CHG. (%) DEC.08 CHG. (%) DEC.08 CHG. (%)Information TechnologyHCL Technologies Buy 25,790 8.8 5,766 8.6 3,924 16.9Infosys Buy 58,270 7.5 19,308 7.6 15,391 7.5MphasiS Buy 9,594 14.8 1,880 6.1 1,220 -13.6Patni Computer Neutral 8,789 3.1 1,594 13.9 987 -12.5Satyam Computer Under Review 30,536 8.3 7,230 11.1 6,182 6.4TCS Buy 75,250 8.2 19,512 7.2 15,202 20.5Tech Mahindra Neutral 12,458 7.0 2,746 -15.8 2,281 -3.1Wipro Buy 61,140 7.7 11,804 13.8 9,602 16.8Sector Aggregate 281,827 8.0 69,840 7.8 54,789 11.3Vikas Jadhav (Vikas.Jadhav@MotilalOswal.com); Tel: +91 22 3982 5585/Vihang Naik (vihang.naik@motilaloswal.com) +91 22 3982 543631 December 2008139

Information TechnologyTCS CEO speaks of living in unpredictable timesAround mid-December, India’s largest IT company’s (TCS) CEO Mr. Ramdoraiquoted,”I think it is impossible to predict what is really happening, because we areliving in times where everything is unpredictable. I cannot say anything right now(on growth in Indian IT sector) because of the current situation in the marketplace.Any number anybody gives, let me tell you, is a guess. Overall things are in a badshape. Right now, nobody knows anything. So we have to watch and play it by theday”.Our recent interaction with the frontline IT services companies confirms slowing demandfor IT services. We are revising downwards our FY09 and FY10 US$ revenue and earningsestimates of IT companies to factor in lower demand for IT services. We have revised ourFY10 US$ term revenue growth estimates for frontline IT companies from earlier rangeof 8-18% to current range of 0%-11%. For Infosys, which provides annual guidance(considered benchmark for IT growth), we are cutting our FY10 US$ revenue growthestimates to 4% from 12% assumed earlier, which embeds ~8% volume growth and ~3%pricing degrowth.The 3QFY09 revenue growth will also be impacted negatively on account of the GBP andeuro having lost further ground against US$ during the quarter with average 17% and13% depreciation respectively v/s ~4% during 2QFY09. This would result in lower (currencyled) realization in 3QFY09 and FY10 assuming current levels of currency rates withstronger dollar prevailing. We are revising our Re/US$ assumptions with average rate ofRs45.6 v/s Rs45.2 earlier for FY09 and Rs45.6 for FY10 against Rs44 earlier. The revisedestimates are given below:REVISED EARNING ESTIMATES (RS/SHARE)OLD ESTIMATES REVISED ESTIMATESAVERAGE RS/US$ RATE 45.2 44 45.6 45.6FY09 FY10 FY09 FY10Infosys 104.4 109.1 101.1 105.4TCS 58.1 63.3 56.5 57.0Wipro 25.1 27.4 24.6 24.7Satyam 34.1 37.2 35.1 34.3HCLT 26.1 24.8 24.2 23.3Source: MOSLUS$ revenue degrowth seen across large capsWe expect all of the top five IT companies to post US$ revenue degrowth in 3QFY09primarily on account of the sharp depreciation of GBP and euro against US$ by over 13%v/s 4% in 2QFY09. This would be the first ever quarter for Infosys in the past decade(almost 40 quarters) when it is expected to report negative revenue growth and its lowestvolume growth. The closest Infosys came to report negative US$ revenue growth was in3QFY02 (post 9/11 attacks in US) when its revenue was flat and grew only 0.23% QoQ.We expect the US$ topline of most of the IT companies in our universe to report negative31 December 2008140

Information Technologygrowth primarily on account of unfavorable cross currency movement, lower demand,increasing pricing pressures, lower billing days, and an absence of budget flush in 4QCY08.CROSS CURRENCYAverageINR/USD CHG.% USD/GBP CHG.% USD/EURO CHG.% JPY/USD CHG.%2QFY08 40.54 -1.6 2.02 1.8 1.37 1.9 117.85 -2.53QFY08 39.48 -2.6 2.04 1.1 1.45 5.4 113.15 -4.04QFY08 39.78 0.8 1.98 -3.2 1.50 3.5 105.34 -6.91QFY09 41.71 4.9 1.97 -0.3 1.56 4.3 104.59 -0.72QFY09 43.79 5.0 1.89 -4.0 1.50 -3.8 107.60 2.93QFY09 48.77 11.4 1.57 -16.9 1.31 -12.9 95.98 -10.8Period End2QFY08 39.84 -2.1 2.05 1.9 1.43 5.4 114.81 -6.83QFY08 39.42 -1.1 1.99 -3.0 1.46 2.3 111.75 -2.74QFY08 40.13 1.8 1.98 -0.1 1.58 8.2 99.69 -10.81QFY09 43.03 7.2 1.99 0.4 1.58 -0.2 106.21 6.52QFY09 46.99 9.2 1.78 -10.6 1.41 -10.6 106.11 -0.13QFY09 48.80 3.9 1.46 -18.0 1.40 -0.9 90.64 -14.6Source: Bloomberg/MOSLPricing expected to take a noticeable hitRealizations are expected to decline QoQ on account of shrinking IT budgets, new projectsbeing initialized at lower billing rates as well as re-negotiations in existing projects. Webelieve maintaining current pricing will get difficult as the impact of the credit crisis forcesclients to cut costs. Increasing competitive pressures from established MNC players likeAccenture and IBM Global would add to the pricing pressures from Indian vendors.Muted margin expansion despite ~11% INR depreciationINR depreciated by 11% v/s the US$ during the quarter from an average rate of 43.79INR/US$ to 48.77 INR/US$. This is expected to positively impact operating margins by~350bp. Still EBIDTA margin expansion is not likely due to lower US$ growth, lowerrealizations, and lower utilization.Slowdown spreading to other sectorsAs the fallout of the credit crisis slowdown is spreading on to other sectors like automobiles,manufacturing and retail, demand for IT services in other sectors will be also impactedapart from BFSI sector (where it began). The pricing pressure which was till now predominantlybeing seen in BFSI is likely to spread to other sectors as well. We are factoringin a pricing decline of ~3% for Infosys in FY10.Forex loss on hedges to continueThe change in the direction of exchange rate movement portends that the hedging strategieswill go awry, leading to forex losses below the operating level. While Infosys and Satyam31 December 2008141

Information Technologyfollow the mark-to-market method of accounting for the losses, the other three (TCS,Wipro and HCL Tech) follow cash flow accounting. Although rupee depreciated by ~11%during 3Q (on average basis), it depreciated by 4% on period ended basis which will resultin lower forex loss as compared to 2QFY09.HEDGING POSITION AS OF 30 SEPTEMBER 2008 - US$MCOMPANY HEDGES AS ON 2QFY09 3QFY09E REMARK30TH SEP GAIN/(LOSS) GAIN/(LOSS)@ RS49/$TCS 1,250 (58) (26) US$ 480m hedges due in 3QInfosys 932 (28) (18) 3Q hedging expected around US$1b levelsWipro 2,100 (15) (6) Forex loss on Hedges and ECB loansSatyam 613 2 (3) 3Q hedging expected around 600m levelsHCL Tech 1,900 (22) (10) 3Q hedging expected around 1.8b levelsSource: Company/MOSLValuations and viewWe believe the next two quarters would be highly challenging for Indian IT companies onaccount of uncertainty in global demand and cross currency related issues. The finalizationof IT budgets is likely to take much longer than March 2009 as in last year and even ifbudgets do get finalized there will still be uncertainty on the actual spending in thesebudgets on account of global slowdown and uncertain business environment.The IT business slowdown was captured during Infosys 2QFY09 results and revenuegrowth was revised downwards from 19-21% to 13.1-15.2%. We expect this to be furtherrevised downward by 100-150bp after 3QFY09 results to factor in the cross currencyimpact.ASSUMPTIONS LOWER THAN GUIDANCEGUIDANCE# ASSUMPTIONS3QFY09E FY09E 3QFY09E FY09EInfosys (M)US$ Revenue 1,220 4,810 1,177 4,740% Growth* 0.3 15.1 -3.2 13.5INR Revenue 57,300 217,310 58,270 218,211% Growth* 5.7 30.2 7.5 30.7EPS (Rs) 26.63 101 26.90 101% Growth* 6.4 24.0 7.5 27.1Satyam (M)US$ Revenue 652.2 2590 617 2,522% Growth* 0.0 21.0 -5.4 18.0INR Revenue 30,340 114,750 30,536 114,485% Growth* 7.6 35.4 8.3 35.1EPS (Rs) 8.65 34.1 9.14 34.40% Growth* 0.2 35.1 5.9 36.1EPS assumption based on adjusted PAT ; # Higher End; * QoQ Growth for 3QFY09E Source: MOSL31 December 2008142

Information TechnologyFor FY10, most frontliners are not able to convincingly put a number for US$ termsgrowth rates given the fluid and uncertain business environment. Our interaction withmanagements of top IT companies makes us believe most frontliners have internal plansfor a single digit revenue growth (US$ terms) in FY10.KEY ASSUMPTIONSINFOSYS TCS* WIPRO IT# SATYAM HCL TECH**FY09E FY10E FY09E FY10E FY09E FY10E FY09E FY10E FY09E FY10ESales (US$ M) 4,740 4,951 6,224 6,686 5,178 5,442 2,522 2,560 2,312 2,760Growth (%) 13.5 4.4 8.9 7.4 21.5 5.1 18.0 1.5 23.0 19.4Sales (INR M) 218,211 225,529 285,918 304,568 260,347 280,483 114,485 116,570 110,554 123,568Growth (%) 30.7 3.4 25.1 6.5 31.5 7.7 35.1 1.8 44.7 11.8Volume Growth (%) 12.6 7.7 17.2 6.3 13.6 3.3 18.8 3.7 13.3 8.7Realisation Growth (%) 0.1 -2.8 -7.0 -3.2 3.3 -0.6 -1.4 -4.3 -3.1 -0.3Utilization Including Trainees (%) 69.0 72.7 74.5 74.9 75.3 75.4 75.3 78.3 73.6 74.8EBITDA (%) 32.5 32.2 25.2 23.9 17.1 15.7 0.2 0.2 21.6 19.6EPS (Rs) 101.1 105.4 56.5 57.0 24.6 24.7 34.4 34.3 24.2 23.3EPS Growth (%) 27.1 4.2 10.1 0.9 10.8 0.6 36.1 -0.2 56.8 -3.9# EBIT and EPS for Wipro Consolidated, Citi Technology Services fully consolidated in FY10 Source: MOSL* CGSL consolidated in 4QFY09; ** Axon consolidation effective in Dec ‘08Infosys trading near historical lowsWe have dissected Infosys’ earnings growth since listing into five phases and have observedthe P/E which the company has traded at vis-à-vis its EPS growth. We broadly classifythe period into the following phases:INFOSYS - GROWTH PHASESPHASE YEARS EARNINGS CAGR (%) AVERAGE P/E (X)Pre-Dotcom Boom FY94-FY98 57 15Dotcom Boom FY99-FY01 116 47Slowdown FY02-FY03 24 24Expansion FY04-FY08 34 21Credit Crisis FY09-FY10 15 15Source: Company/MOSLWe observe the valuations have closely preceded earnings growth since the dotcom bubble.The expansion and contraction in P/E multiple has been less drastic than the change inearnings growth for obvious reasons. In the last slowdown, Infosys’ average P/E at 24xwas closely linked to the 24% earnings CAGR in that phase. If a similar relationship isexpected to follow in the current slowdown, the P/E multiples should average at 15xforward earnings.The current valuations are below the lows of the last slowdown. In the dotcom bust,Infosys traded at its lowest P/E of 12.3x while the CMP implies a P/E of 10.6x. Our DCFbasedtarget price implies a P/E multiple of 12.8x, which is at a 4% premium to the lowestP/E in the preceding slowdown.31 December 2008143

Information TechnologyVALUATIONS BELOW THE LOWS OF LAST SLOWDOWN40.0122.430.020.010.0P/E 5 yr Average P/E Lowest P/E in last slowdown0.0Apr-94Oct-94Apr-95Oct-95Apr-96Oct-96Apr-97Oct-97Apr-98Oct-98Apr-99Oct-99Apr-00Oct-00Apr-01Oct-01Apr-02Oct-02Apr-03Oct-03Apr-04Oct-04Apr-05Oct-05Apr-06Oct-06Apr-07Oct-07Apr-08Oct-08Source: Company/MOSLAmong the large caps, we like Infosys and TCS, which have handled transformational/large deals and have a multi-services portfolio including sizable consulting services, whichwould gain prominence in an uncertain environment. Wipro will do better post its streamliningof Infocrossing acquisition. We also like HCL Technologies which has won significantdeals in such troubled times but integration of Axon would be a key success factor. InFY10, we foresee HCL Tech emerge as India’s fourth largest IT companies displacingSatyam. Satyam remains venerable due to lower span of its service lines, especiallyinfrastructure and BPO services where it has yet to make its presence felt. Also, Satyam’sunsuccessful attempt in diversifying into group companies’ unrelated businesses of realestate, infra and construction for US$1.6b raises various uncertainties on its managementcontrol, client confidence, employee morale and corporate governance.31 December 2008144

Information TechnologyStock performance and valuationsSTOCK PERFORMANCE (%)ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARInformation TechnologyHCL Technologies -41 -65 -16 -13 -12 -13Infosys -20 -37 5 16 9 15MphasiS -17 -49 8 3 11 3Patni Computer -27 -61 -3 -9 1 -9Satyam Computer -43 -62 -18 -10 -14 -10TCS -28 -56 -3 -3 1 -4Tech Mahindra -60 -78 -35 -26 -31 -26Wipro -31 -56 -6 -3 -3 -3RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)105SensexMOSL IT Index102MOSL IT IndexSensex95878572755765Sep-08 Oct-08 Nov-08 Dec-0842Dec-07 Mar-08 Jun-08 Sep-08 Dec-08COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EInformation TechnologyHCL Technologies 115 Buy 15.5 24.2 23.3 7.5 4.8 4.9 3.1 3.4 3.1 20.1 28.9 24.7Infosys 1,118 Buy 79.5 101.7 105.3 14.1 11.0 10.6 10.9 7.8 7.0 36.4 37.5 31.3MphasiS 156 Buy 12.2 21.7 24.5 12.8 7.2 6.4 7.6 4.1 2.8 31.0 42.5 36.4Patni Computer 129 Neutral 32.4 30.2 27.6 4.0 4.3 4.7 0.9 0.7 0.6 18.9 14.1 11.8Satyam Computer 170 UR 25.2 34.4 34.3 6.7 5.0 5.0 3.9 2.1 1.3 26.0 28.3 23.1TCS 478 Buy 51.3 56.5 57.0 9.3 8.5 8.4 7.4 5.7 4.9 47.0 38.8 31.3Tech Mahindra 248 Neutral 58.3 78.4 82.2 4.2 3.2 3.0 3.5 2.0 1.3 70.7 56.5 38.5Wipro 234 Buy 22.2 24.6 24.7 10.5 9.5 9.5 6.3 4.7 4.8 27.9 25.1 21.1Sector Aggregate 10.1 8.3 8.2 7.1 5.2 4.6 30.1 29.4 24.7UR = Under Review31 December 2008145

Results PreviewSECTOR: INFORMATION TECHNOLOGYHCL TechnologiesSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGHCLT INREUTERS CODEHCLT.BO31 December 2008Previous Recommendation: BuyBuyRs115Equity Shares (m) 667.952-Week Range 336/1031,6,12 Rel. Perf. (%) -22/-26/-13M.Cap. (Rs b) 76.9M.Cap. (US$ b) 1.6QUARTERLY PERFORMANCE (US GAAP)YEAR NET SALES PAT* EPS* EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA6/07A 60,336 12,543 18.9 3.6 6.1 1.5 27.7 27.6 0.9 4.06/08A 76,394 10,269 15.5 -18.2 7.5 1.5 20.1 20.0 0.7 3.16/09E# 110,554 16,208 24.2 56.8 4.8 1.3 28.9 24.2 0.7 3.46/10E 123,568 15,814 23.3 -3.9 4.9 1.1 24.7 19.3 0.6 3.1* After ESOP charges; # includes Axon numbers since December 2008? HCL Technologies is expected to clock revenue growth of 8.8% QoQ to Rs26b.? Consolidated EBITDA margin is likely to be flat to factor in wage hike in the last quarter and lower realization inspiteof rupee depreciation of over 11% during the quarter.? HCLT has forex forward covers of ~US$1.9b. We expect the company to book losses worth Rs500m due to largeforex covers. Losses are expected to be lower on account of low rupee depreciation on period end basis.? We expect the company to report net profit of Rs3.9b v/s Rs3.4b in 1QFY09.? The company has completed the Axon acquisition during the quarter. The consolidation will occur in the currentquarter with Axon’s revenue contribution for half of December, expected at ~US$17m.? Axon’s consideration was lower by US$137m at US$701m due to sharper depreciation of GBP against US$ duringthe quarter. HCL has financed Axon’s acquisition through a US$ denominated loan of US$585m and US$116mfunded through internal accruals? HCL has also signed deals worth US$1b during the quarter, the highest in its history.? The stock trades at 4.8x FY09E and 4.9x FY10E earnings estimates (after ESOP charges). Maintain Buy.? Key risks: Shrinking IT spends with delay in decision making, currency volatility, pricing pressures, and successfulintegration of Axon Plc.(RS MILLION)Y/E JUNE FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QERevenues 17,092 18,166 19,448 21,688 23,693 25,790 30,346 30,726 76,394 110,554Q-o-Q Change (%) 6.0 6.3 7.1 11.5 9.2 8.8 17.7 1.3 26.6 44.7Direct Expenses 10,763 11,258 11,946 12,910 14,363 15,661 18,908 19,241 46,877 68,174Sales, General & Admin. Exp. 2,689 3,023 3,172 3,694 4,019 4,363 5,021 5,065 12,578 18,468Operating Profit 3,640 3,885 4,330 5,084 5,311 5,766 6,417 6,420 16,939 23,913Margins (%) 21.3 21.4 22.3 23.4 22.4 22.4 21.1 20.9 22.2 21.6Other Income 359 484 499 355 558 432 418 418 1,697 1,826Forex Gain / (Loss) 145 58 -271 -2,999 -974 -482 152 50 -3,067 -1,254Depreciation 686 723 773 850 908 944 984 1,010 3,032 3,846Interest 0 0 0 0 0 72 418 410 0 899PBT bef. Extra-ordinary 3,458 3,704 3,785 1,590 3,987 4,700 5,584 5,468 12,537 19,739Provision for Tax 346 355 368 203 439 588 893 875 1,272 2,795Rate (%) 10.0 9.6 9.7 12.8 11.0 12.5 16.0 16.0 10.1 14.2Minority Interest 28 21 -7 -23 -14 -15 -15 -16 19 -60ESOP Charges 247 240 236 254 204 203 197 193 977 796PAT after ESOP Chrg 2,837 3,088 3,188 1,156 3,358 3,924 4,509 4,416 10,269 16,208Q-o-Q Change (%) -38.9 8.8 3.2 -63.7 190.5 16.9 14.9 -2.1 -17.0 51.2E: MOSL Estimates; # includes Axon numbers since December 2008Vikas Jadhav (Vikas.Jadhav@MotilalOswal.com); Tel: +91 22 3982 5585/Vihang Naik (vihang.naik@motilaloswal.com) +91 22 3982 543631 December 2008146

Results PreviewSECTOR: INFORMATION TECHNOLOGYSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGINFO INREUTERS CODEINFY.BO31 December 2008Previous Recommendation: BuyInfosysBuyRs1,118Equity Shares (m) 572.552-Week Range 2,017/1,0401,6,12 Rel. Perf. (%) -16/-7/16M.Cap. (Rs b) 640.0M.Cap. (US$ b) 13.2YEAR NET SALES PAT* EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 138,930 37,250 66.1 48.1 16.9 5.6 40.9 40.8 4.1 13.03/08A 166,920 45,580 79.5 20.3 14.1 4.6 36.4 36.4 3.4 10.93/09E 218,211 58,033 101.1 27.1 11.1 3.7 37.3 37.3 2.6 7.93/10E 225,529 60,581 105.4 4.2 10.6 3.0 31.3 31.3 2.3 7.0* 1:1 bonus in FY07, accordingly ratios are adjusted, PAT figures are adjusted PAT? We expect consolidated revenue to grow 7.5% QoQ. Revenue growth in US dollar terms is expected to be -3.6%QoQ due to an average ~16% depreciation of GBP and ~13% depreciation of euro v/s the US$ during the quarter.We expect pricing to be marginally negative with modest volume growth assumptions. Infosys had guided for sequentialUS$ revenue growth of -3.4% to 0.3%. We expect Infosys to deliver US$ growth below the top end of its guidancedue to cross currency headwinds as well as slowing volume growth.? EBITDA margin is expected to be flat at 33.1% since the negative margin impact due to pricing and utilization isexpected to be compensated by positive margin push owing to average rupee depreciation of ~11% in 3Q.? Infosys holds hedges worth ~US$930m with a mix of options and forwards as of September 2008. We expect Infosysto book forex losses of Rs900m.? We expect net profit to grow by 7.5% QoQ to Rs15.4b.? The company will honour its commitment of hiring 25,000 employees (gross) in FY09, having already hired ~17,000in 1HFY09. We expect the utilization to remain low due to muted demand. The utilization is expected to improve inFY10 with low hiring and reduced attrition.? The stock currently trades at 11.1x FY09E and 10.6x FY10E earning estimates. Maintain Buy.? Key risks: Shrinking IT spends with delay in decision making, currency volatility, pricing pressures.QUARTERLY PERFORMANCE (INDIAN GAAP)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QERevenues 37,730 41,060 42,710 45,420 48,540 54,180 58,270 57,221 166,920 218,211Q-o-Q Change (%) 0.0 8.8 4.0 6.3 6.9 11.6 7.5 -1.8 20.1 30.7Direct Expenses 21,690 22,310 23,250 24,820 27,540 28,910 31,194 30,490 92,070 118,134SG&A 5,200 5,910 5,540 5,820 6,210 7,330 7,769 7,919 22,470 29,228Operating Profit 10,840 12,840 13,920 14,780 14,790 17,940 19,308 18,812 52,380 70,849Margins (%) 28.7 31.3 32.6 32.5 30.5 33.1 33.1 32.9 31.4 32.5Other Income 2,530 1,540 1,580 1,390 1,170 660 1,175 1,893 7,040 4,898Depreciation 1,440 1,440 1,530 1,570 1,690 1,770 2,214 2,174 5,980 7,849PBT bef. Extra-ordinary 11,930 12,940 13,970 14,600 14,270 16,830 18,269 18,530 53,440 67,898Provision for Tax 1,650 1,940 2,160 2,110 1,560 2,510 2,877 2,918 7,860 9,866Rate (%) 13.8 15.0 15.5 14.5 10.9 14.9 15.8 15.8 14.7 14.5PAT before EO 10,280 11,000 11,810 12,490 12,710 14,320 15,391 15,611 45,580 58,033Extra-ordinary Items 510 0 500 0 310 0 0 0 1,010 310PAT aft. Minority and EO 10,790 11,000 12,310 12,490 13,020 14,320 15,391 15,611 46,590 58,343Q-o-Q Change (%) -5.7 1.9 11.9 1.5 4.2 10.0 7.5 1.4 20.8 25.2E: MOSt EstimatesVikas Jadhav (Vikas.Jadhav@MotilalOswal.com); Tel: +91 22 3982 5585/Vihang Naik (vihang.naik@motilaloswal.com) +91 22 3982 543631 December 2008147

Results PreviewSECTOR: INFORMATION TECHNOLOGYMphasiSSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGMPHL INREUTERS CODEMBFL.BO31 December 2008Previous Recommendation: BuyBuyRs156Equity Shares (m) 208.752-Week Range 316/1191,6,12 Rel. Perf. (%) -2/1/3M.Cap. (Rs b) 32.6M.Cap. (US$ b) 0.7YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 11,958 1,199 7.3 -21.5 21.4 3.4 21.2 23.5 2.0 11.73/08A 24,231 2,553 12.2 67.4 12.8 3.6 31.0 32.1 1.3 7.63/09E 39,728 4,538 21.7 77.6 7.2 2.7 42.5 48.0 0.8 4.13/10E 46,302 5,115 24.5 12.7 6.4 2.1 36.4 41.5 0.5 2.8? We expect Mphasis to report revenue of 9.6b in 1QFY10. Mphasis has changed its financial year to October endingin order to align with the reporting year of its indirect parent company Hewlett Packard, making sequential growthincomparable.? EBITDA margin is expected to be at 19.6% during the quarter.? Net profit is expected to degrow by 13% QoQ due to higher tax rate (11% v/s 5.2%).? Post the recent turmoil in financial markets, the management has indicated that the net hiring may slow down to~3,000 net hires (v/s earlier guidance of 4,000)? Lower hiring will enable utilization to improve significantly from 71% (including trainees) in the current quarter.? We expect the HP-EDS merger to be positive in the long term for Mphasis, given that the overlap of servicesbetween the two in India is low.? The stock currently trades at 7.2x FY09E and 6.4x FY10E earnings estimates. Maintain Buy.? Key risks: Delay in decision making for IT spend, currency volatility, pricing pressure, and integration of EDS withHPQ.QUARTERLY PERFORMANCE(RS MILLION)Y/E OCTOBER 7ME OCT.08 FY09E FY08 PEOCT.08 FY09E1Q 2Q 1MOCT.08 1Q 2Q 3Q 4QRevenues 7,422 8,361 3,282 9,594 9,769 10,043 10,321 24,231 19,065 39,728Q-o-Q Change (%) 12.9 12.7 N.A. N.A. 1.8 2.8 2.8 102.6 N.A. N.A.Direct Expenses 5,472 5,754 2,089 6,764 7,033 7,081 7,380 17,480 13,315 28,258Sales, General & Admin. Exps. 704 836 325 950 967 1,085 1,083 2,557 1,864 4,085Operating Profit 1,247 1,771 868 1,880 1,768 1,878 1,858 4,194 3,885 7,385Margins (%) 16.8 21.2 26.4 19.6 18.1 18.7 18.0 17.3 20.4 18.6Other Income 18 164 36 11 6 -35 -35 -130 218 -54Depreciation 412 447 147 528 547 542 557 1,402 1,006 2,174PBT bef. Extra-ordinary 853 1,488 757 1,363 1,226 1,301 1,266 2,661 3,096 5,155Provision for Tax 62 77 4 143 153 163 158 109 143 617Rate (%) 7.3 5.2 0.5 10.5 12.5 12.5 12.5 4.1 4.6 12.0PAT bef. Extra-ordinary 790 1,411 753 1,220 1,073 1,138 1,108 2,552 2,954 4,538Q-o-Q Change (%) 10.6 78.6 N.A. N.A. -12.0 6.1 -2.7 112.9 N.A. N.A.E: MOSL Estimates; Financial year ending has been changed to YE Oct from March earlier.Vikas Jadhav (Vikas.Jadhav@MotilalOswal.com); Tel: +91 22 3982 5585/Vihang Naik (vihang.naik@motilaloswal.com) +91 22 3982 543631 December 2008148

Results PreviewSECTOR: INFORMATION TECHNOLOGYPatni Computer SystemsSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGPATNI INREUTERS CODEPTNI.BO31 December 2008Previous Recommendation: NeutralNeutralRs129Equity Shares (m) 139.152-Week Range 340/1111,6,12 Rel. Perf. (%) -16/-12/-9M.Cap. (Rs b) 17.9M.Cap. (US$ b) 0.4YEAR NET SALES PAT* EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA12/06A 26,112 3,572 24.9 14.6 5.2 0.8 16.8 21.2 0.2 1.012/07A 26,950 4,643 32.4 30.0 4.0 0.7 18.9 22.5 0.2 0.912/08E 32,210 3,878 30.2 -6.8 4.3 0.6 14.1 16.2 0.1 0.512/09E 32,352 3,556 27.6 -8.7 4.7 0.5 11.8 14.0 0.0 0.3* Reflects adjusted PAT? Revenue is expected to grow 3.1% QoQ to Rs8.8b in rupee terms in 4QCY08. We expect the US$ revenue todegrow by 3.2%, in line with the company guidance.? EBITDA margin is expected to marginally improve to 18.1% as against 16.4% during the last quarter. We do notexpect the operating margin to substantially improve despite rupee depreciation QoQ on account of low pricingflexibility and lack of sufficient operating levers.? We expect net profit to decline 50% QoQ at Rs987m, primarily on account of higher forex loss of US$6m (Rs300m)and also on account of lower growth and cross currency impact.? Company has appointed Jeya Kumar as CEO. Mr Kumar was a CEO for Mphasis Ltd before joining Patni.? The stock trades at 4.3x CY08E and 4.7x CY09E earnings estimates. We remain Neutral on the stock.? Key risks: Shrinking IT spends with delay in decision making, currency volatility, pricing pressures.QUARTERLY PERFORMANCE (US GAAP)(RS MILLION)Y/E DECEMBER CY07 CY08 CY07 CY08E1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QERevenues 6,724 6,628 6,736 6,862 7,061 7,837 8,523 8,789 26,950 32,210Q-o-Q Change (%) -1.2 -1.4 1.6 1.9 2.9 11.0 8.7 3.1 3.2 19.5Direct Expenses 4,204 4,303 4,470 4,594 4,843 5,267 5,594 5,691 17,570 21,395Sales, General & Admin. Exp. 1,094 1,108 1,149 1,130 1,157 1,365 1,530 1,504 4,480 5,557Operating Profit 1,427 1,217 1,117 1,138 1,061 1,205 1,399 1,594 4,899 5,259Margins (%) 21.2 18.4 16.6 16.6 15.0 15.4 16.4 18.1 18.2 16.3Other Income 268 635 441 295 59 285 197 -125 1,638 416Depreciation 234 252 262 257 279 283 300 334 1,004 1,195PBT bef. Extra-ordinary 1,460 1,600 1,296 1,176 842 1,207 1,296 1,135 5,533 4,480Provision for Tax 260 253 198 179 117 170 168 148 890 602Rate (%) 17.8 15.8 15.3 15.2 13.9 14.1 12.9 13.0 16.1 13.4Net Income bef. EO 1,200 1,348 1,098 997 725 1,037 1,129 987 4,643 3,878Q-o-Q Change (%) 5.8 12.3 -18.5 -9.2 -27.3 43.1 8.8 -12.5 30.0 -16.5Extra-ordinary Items 0 0 0 0 0 0 -873 0 0 -873Net Income after EO 1,200 1,348 1,098 997 725 1,037 2,002 987 4,643 4,751Q-o-Q Change (%) 5.8 12.3 -18.5 -9.2 -27.3 43.1 93.0 -50.7 74.9 2.3E: MOSL EstimatesVikas Jadhav (Vikas.Jadhav@MotilalOswal.com); Tel: +91 22 3982 5585/Vihang Naik (vihang.naik@motilaloswal.com) +91 22 3982 543631 December 2008149

Results PreviewSECTOR: INFORMATION TECHNOLOGYSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGSCS INREUTERS CODESATY.BO31 December 2008Previous Recommendation: Under ReviewSatyam ComputerUnder ReviewRs170Equity Shares (m) 673.152-Week Range 544/1151,6,12 Rel. Perf. (%) -36/-33/-10M.Cap. (Rs b) 114.5M.Cap. (US$ b) 2.4YEAR NET SALES PAT* EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 64,851 14,047 21.5 41.7 7.9 1.9 27.9 27.5 1.1 4.73/08A 84,735 16,879 25.2 17.7 6.7 1.6 26.0 25.6 0.8 3.93/09E 114,485 23,204 34.4 36.1 5.0 1.3 28.3 28.0 0.5 2.23/10E 116,570 23,475 34.3 -0.2 5.0 1.0 23.1 22.9 0.3 1.3* PAT figures reflects adjusted PAT? Satyam is expected to report topline growth of 8.3% QoQ at Rs30.5b in 3QFY09. In dollar terms, we expect thetopline to degrow by 5.4%.? EBITDA margin is expected to expand by 60bp to 23.7% on account of rupee depreciation of over 10% and baseeffect of salary hikes taken in 2QFY09.? Net profit is expected to report growth of 6.4% at Rs 6.2b v/s 5.8b in 2Q.? Company has outstanding hedges of US$600m, which are expected to result in forex loss of Rs150m during thequarter.? Satyam’s aborted bid to diversify in unrelated businesses of construction, real estate and infrastructure by taking overMaytas Infra and Maytas Properties (having the same promoter as Satyam) is expected to impair the company’simage making it incrementally difficult to bag long term deals from clients.? The stock price has declined significantly (~30%) post the incident, trading at an average discount of ~60% toInfosys. We expect the valuation discount to stay given the image hit that the company has taken due to the acquisitioncontroversy.? The stock currently trades at 5x FY09E and 5x FY10E earnings estimates. Under Review.? Key risks: Management’s low focus on IT, shrinking IT spends with delay in decision making, currency volatility,pricing pressures.QUARTERLY PERFORMANCE (INDIAN GAAP)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QERevenues 18,302 20,317 21,956 24,160 26,208 28,193 30,536 29,548 84,735 114,485Q-o-Q Change (%) 2.9 11.0 8.1 10.0 8.5 7.6 8.3 -3.2 30.7 35.1Direct Expenses 11,062 13,028 13,806 14,699 15,412 17,211 18,252 17,961 52,595 68,836Sales, General & Admin. Exp. 3,137 3,263 3,437 3,954 4,474 4,473 5,054 4,964 13,792 18,964Operating Profit 4,103 4,027 4,712 5,506 6,323 6,509 7,230 6,623 18,348 26,686Margins (%) 22.4 19.8 21.5 22.8 24.1 23.1 23.7 22.4 21.7 23.3Other Income 632 1,105 705 230 331 796 609 680 2,672 2,416Depreciation 387 391 423 435 467 645 672 650 1,636 2,434Interest 33 42 81 46 57 132 53 52 202 295PBT bef. Extra-ordinary 4,315 4,700 4,913 5,255 6,130 6,528 7,114 6,602 19,182 26,373Provision for Tax 532 609 576 587 653 720 932 865 2,304 3,169Rate (%) 12.3 13.0 11.7 11.2 10.6 11.0 13.1 13.1 12.0 12.0PAT bef. Extra-ordinary 3,783 4,091 4,336 4,668 5,477 5,809 6,182 5,737 16,879 23,204Q-o-Q Change (%) -3.9 8.1 6.0 7.7 17.3 6.1 6.4 -7.2 20.2 37.5E: MOSL EstimatesVikas Jadhav (Vikas.Jadhav@MotilalOswal.com); Tel: +91 22 3982 5585/Vihang Naik (vihang.naik@motilaloswal.com) +91 22 3982 543631 December 2008150

Results PreviewSECTOR: INFORMATION TECHNOLOGYSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGTCS INREUTERS CODETCS.BO31 December 2008Previous Recommendation: BuyTata Consultancy ServicesBuyRs478Equity Shares (m) 978.652-Week Range 1,097/4181,6,12 Rel. Perf. (%) -20/-16/-3M.Cap. (Rs b) 467.9M.Cap. (US$ b) 9.6YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 186,334 41,316 41.7 179.3 11.5 5.2 55.1 50.3 2.4 8.93/08A 228,614 50,484 51.3 23.1 9.3 3.8 47.0 43.0 1.9 7.43/09E 285,918 55,275 56.5 10.1 8.5 2.9 38.8 36.3 1.4 5.73/10E 304,568 55,757 57.0 0.9 8.4 2.4 31.3 29.6 1.2 4.9* includes Citigroup Global Services revenues since 4QFY09? TCS is expected to report Rs75.2b revenue, a growth of 8.2% QoQ, with a dollar revenue growth of -3.4% QoQ in2QFY09.? EBIDTA margin is expected to be at 24.2%, lower by ~200bp QoQ due to lower utilization and pricing decline.? TCS has forex hedges amounting to ~US$1.3b, of which US$580 would be marked to market in 3QFY09. We haveassumed the forex losses at Rs1,300m for the quarter. The company‘s cash flow accounting policy would reflect partof the losses in balance sheet under other comprehensive income (OCI) which was at Rs6.7b in 2QFY09.? Net profit is expected to grow by 11.6% QoQ to Rs14.1b.? During the quarter, the company acquired Citigroup Global Services (CTGS) for all cash US$505m along withcommitted contract for US$2.5b revenue over 9.5 years. This contract is largest in the Indian IT sector till date. Thenumbers will be consolidated in 4QFY09.? Billing rates are expected to be marginally negative QoQ owing to lower billing rates in new contracts as wellrenegotiations in existing ones.? The stock trades at 8.5x FY09E and 8.4x FY10E earnings estimates. Maintain Buy.? Key risks: Shrinking IT spends with delay in decision making, currency volatility, pricing pressures.QUARTERLY PERFORMANCE (US GAAP)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E*1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QE*Revenues 52,029 56,398 59,241 60,947 64,107 69,534 75,250 77,027 228,615 285,918Q-o-Q Change (%) 1.1 8.4 5.0 2.9 5.2 8.5 8.2 2.4 22.7 25.1Direct Expenses 28,221 30,152 31,384 32,587 36,427 36,879 40,285 43,096 122,344 156,687Sales, General & Admin. Exp. 10,543 11,426 12,068 12,836 12,366 14,458 15,453 14,843 46,873 57,120Operating Profit 13,265 14,820 15,789 15,524 15,314 18,197 19,512 19,088 59,398 72,112Margins (%) 25.5 26.3 26.7 25.5 23.9 26.2 25.9 24.8 26.0 25.2Other Income 1,516 1,105 1,048 781 332 -1,784 -162 303 4,450 -1,311Depreciation 1,265 1,381 1,475 1,625 1,167 1,349 1,505 1,708 5,746 5,729PBT bef. Extra-ordinary 13,516 14,543 15,362 14,681 14,479 15,064 17,845 17,684 58,102 65,072Provision for Tax 1,523 2,037 1,947 1,988 1,947 2,291 2,480 2,493 7,494 9,212Rate (%) 11.3 14.0 12.7 13.5 13.4 15.2 13.9 14.1 12.9 14.2Minority Interest 138 38 107 134 96 158 163 168 416 585Net Income after. EO 11,856 12,469 13,308 12,559 12,436 12,615 15,202 15,022 50,192 55,275Q-o-Q Change (%) 5.9 5.2 6.7 -5.6 -1.0 1.4 20.5 -1.2 23.1 10.1E: MOSL Estimates; * includes Citigroup Global Services revenues since 4QFY09Vikas Jadhav (Vikas.Jadhav@MotilalOswal.com); Tel: +91 22 3982 5585/Vihang Naik (vihang.naik@motilaloswal.com) +91 22 3982 543631 December 2008151

Results PreviewSECTOR: INFORMATION TECHNOLOGYTech MahindraSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGTECHM INREUTERS CODETEML.BO31 December 2008Previous Recommendation: NeutralNeutralRs248Equity Shares (m) 121.752-Week Range (Rs) 1,164/2161,6,12 Rel. Perf. (%) 4/-37/-26M.Cap. (Rs b) 30.1M.Cap. (US$ b) 0.6YEAR NET SALES PAT EPS* EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 29,290 6,124 46.4 121.8 5.3 3.3 79.9 79.4 1.0 3.93/08A 37,661 7,693 58.3 25.6 4.2 2.4 70.7 69.2 0.8 3.53/09E 47,908 9,542 72.4 24.0 3.4 1.4 56.5 55.1 0.5 2.03/10E 50,589 9,893 75.0 3.7 3.3 1.0 38.5 37.9 1.0 1.4* Diluted EPS (before extra-ordinary item)? We expect Tech Mahindra to report 7% QoQ revenue growth in 3QFY09 to Rs 12.6b. The US$ revenue (US$262m)growth is expected to decline by 2.7% QoQ due to USD appreciation against GBP.? EBITDA margin at 22% is expected to decline by 600bp due to over 16% average depreciation of GBP. TechMahindra derives over 65% of revenue in GBP.? Tax rate is expected to be flat at 11.5%.? We expect net profit to degrow by 24% QoQ to Rs2.3b on account of over 16% GBP depreciation during the quarter.? The stock trades at 3.4x FY09E and 3.3x FY10E consolidated (diluted) earnings estimates. Maintain Neutral.? Key risks: Shrinking IT spends with delay in decision making, currency volatility, pricing pressures and clientconcentration.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QERevenues 8,763 8,976 9,704 10,218 11,164 11,648 12,458 12,638 37,661 47,908Q-o-Q Change (%) 0.2 2.4 8.1 5.3 9.3 4.3 7.0 1.4 28.6 27.2Direct Cost 5,492 5,658 6,144 6,560 6,825 6,867 7,843 7,941 23,854 29,476Other Operating Exps 1,338 1,346 1,431 1,434 1,470 1,520 1,869 1,959 5,549 6,818Operating Profit 1,934 1,972 2,129 2,224 2,869 3,261 2,746 2,738 8,259 11,614Margins (%) 22.1 22.0 21.9 21.8 25.7 28.0 22.0 21.7 21.9 24.2Other Income 131 249 300 364 261 -320 118 190 1,044 248Interest 15 26 16 5 2 0 0 0 62 2Depreciation 168 193 206 229 258 267 287 291 796 1,102PBT bef. Extra-ordinary 1,882 2,002 2,207 2,354 2,870 2,674 2,578 2,637 8,445 10,759Provision for Tax 183 187 213 165 282 321 296 316 748 1,216Rate (%) 9.7 9.3 9.7 7.0 9.8 12.0 11.5 12.0 8.9 11.3Minority Interest 3 0 1 -1 2 -1 0 0 3 1Net Income before EO 1,696 1,815 1,993 2,190 2,586 2,354 2,281 2,321 7,693 9,542Q-o-Q Change (%) -13.5 7.0 9.8 9.9 18.1 -9.0 -3.1 1.7 25.7 24.0Extra-ordinary Items 0 2 0 -4,401 0 673 0 0 -4,399 673Net Income after EO 1,696 1,817 1,993 -2,211 2,586 3,027 2,281 2,321 3,294 10,215Q-o-Q Change (%) -151.6 7.2 9.7 -210.9 -217.0 17.0 -24.6 1.7 171.9 210.1E: MOSL EstimatesVikas Jadhav (Vikas.Jadhav@MotilalOswal.com); Tel: +91 22 3982 5585/Vihang Naik (vihang.naik@motilaloswal.com) +91 22 3982 543631 December 2008152

Results PreviewSECTOR: INFORMATION TECHNOLOGYSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGWPRO INREUTERS CODEWIPR.BO31 December 2008Previous Recommendation: BuyWiproBuyRs234Equity Shares (m) 1,467.852-Week Range 540/1821,6,12 Rel.Perf.(%) -10/-18/-3M.Cap. (Rs b) 342.8M.Cap. (US$ b) 7.1YEAR NET SALES PAT* EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 149,431 28,430 20.2 41.8 11.6 3.3 31.5 33.3 1.9 8.23/08A 197,428 32,241 22.2 9.7 10.5 2.6 27.9 27.8 1.5 7.53/09E 260,347 36,035 24.6 10.8 9.5 2.2 25.1 28.1 1.1 5.23/10E 280,483 36,534 24.7 0.6 9.5 1.8 21.1 23.6 0.9 4.9* Reflects adjusted PAT; * Citi Technology Services is fully consolidated in FY10? We expect Wipro to report revenue growth of 7.7% in global IT business in rupee terms at Rs61.1b, with an underlyingdollar degrowth of 0.3% QoQ v/s guidance of 1% growth.? Consolidated EBITDA margin is expected to improve by 240bp due to wage hikes were taken last quarter andfavorable exchange rate movement QoQ.? The company holds forex covers of ~US$2.1b. We expect it to report forex losses of Rs300m.? The quarterly numbers will take into account a part of the offshore salary hikes.? Negative impact due to cross currency headwinds will be lower in case of Wipro due to lower billing in non-dollarcurrencies. Billing in euro and GBP is expected to be lesser than 20%.? We expect consolidated net profit to grow by 26.2% QoQ at Rs10.3b due to over 11% rupee depreciation andimprovement in EBITDA margin.? The stock trades at 9.5x FY09E EPS and 9.5x FY10E EPS. Maintain Buy.? Key risks: Shrinking IT spends with delay in decision making, currency volatility, pricing pressures.CONSOLIDATED QUARTERLY PERFORMANCE (US GAAP)(RS MILLION)Y/E MARCH FY08 FY09* FY08* FY09E*1Q 2Q 3Q* 4Q* 1Q 2Q 3QE 4QEIT Services and Products# 36,604 41,049 45,180 47,882 51,573 56,779 61,140 60,579 170,715 230,071Other Businesses 5,228 6,232 7,181 8,072 8,049 7,316 7,092 7,819 26,713 30,276Revenues 41,832 47,281 52,361 55,954 59,622 64,095 68,232 68,398 197,428 260,347Q-o-Q Change (%) 20.6 13.0 10.7 6.9 6.6 7.5 6.5 0.2 32.1 31.9Total Expenses 32,752 37,644 41,897 44,969 49,087 53,229 56,113 56,035 157,262 214,464EBIT 7,706 8,216 8,689 9,628 10,308 10,371 11,804 12,032 34,239 44,515Margins (%) 18.4 17.4 16.6 17.2 17.3 16.2 17.3 17.6 17.3 17.1Other Income 238 773 651 237 -721 -888 -651 -346 1,899 -2,606PBT 7,944 8,989 9,340 9,865 9,587 9,483 11,153 11,686 36,138 41,909Provision for Tax 839 865 1,074 1,095 1,436 1,240 1,539 1,601 3,873 5,816Rate (%) 10.6 9.6 11.5 11.1 15.0 13.1 13.8 13.7 10.7 13.9Minority Interest 0.0 3.0 5.0 16.0 12.0 22.0 12.0 12.0 24 58Net Income 7,105 8,121 8,261 8,754 8,139 8,221 9,602 10,073 32,241 36,035Q-o-Q Change (%) -10.2 14.3 1.7 6.0 -7.0 1.0 16.8 4.9 -0.3 11.8E: MOSL Estimates; * includes Infocrossing. # reclassified in FY09Vikas Jadhav (Vikas.Jadhav@MotilalOswal.com); Tel: +91 22 3982 5585/Vihang Naik (vihang.naik@motilaloswal.com) +91 22 3982 543631 December 2008153

Results PreviewQUARTER ENDING DECEMBER 2008InfrastructureBSE Sensex: 9,647 S&P CNX: 2,959 31 December 2008COMPANY NAMEBL KashyapGammon IndiaHindustan ConstructionIVRCLJaiprakash AssociatesNagarjuna ConstructionRobust operating performance, increased interest cost to impactprofitabilityDuring 3QFY09, we expect infrastructure companies in our universe to report revenuegrowth of 33.3% YoY, EBIDTA growth of 36.2% YoY, and net profit growth of 0.9%YoY. We expect limited EBITDA margin pressure (down 50bp YoY) during 3QFY09 to10.9% from 11.4% in 3QFY08 on account of higher cost inventories. The net profit willcontinue to be under pressure due to high borrowing cost, which is likely to come downfrom 4QFY09. We expect interest cost as % sales to increase from 2.8% in 3QFY08 to3.6% in 3QFY09. The order intake has been strong for most of the players on accountof heightened pre-election award activity due to strong co-relation with the public/government capex. Currently, the book to bill ratio for the sector stands at 3.2x TTMrevenues, indicating strong revenue visibility.Patel EngineeringSimplex InfrastructureWe expect earnings upgrade in the sector given high earnings sensitivity to the interestcost. Based on our current estimates, the interest cost as % of sales is 3.2% for FY09.Borrowing cost decline of 200-300bp during FY10 against FY09 will impact the earningspositively by 8-12%. We have upgraded earnings of Nagarjuna Construction (NCC) by16% for FY10 to factor in lower interest cost and improvement in the working capital.Our top picks are IVRCL, NCC, and Simplex.EXPECTED QUARTERLY PERFORMANCE SUMMARYRECO SALES EBITDA NET PROFIT(RS MILLION)DEC.08 CHG. (%) DEC.08 CHG. (%) DEC.08 CHG. (%)InfrastructureB.L.Kashyap Under Review 4,774 17.6 501 5.9 284 12.5Gammon India Neutral 5,943 13.7 471 0.6 124 -35.6Hindustan Construction Buy 9,150 22.0 1,215 25.5 259 31.7IVRCL Infra. Buy 12,800 31.3 1,216 12.2 594 6.5Jaiprakash Associates Buy 13,471 49.7 3,686 65.3 1,545 -1.0Nagarjuna Construction Buy 10,944 40.4 1,175 36.3 471 18.8Patel Engg. Neutral 3,274 24.9 584 24.4 289 -17.5Simplex Infra. Buy 10,299 46.3 1,040 47.5 278 26.2Sector Aggregate 70,656 33.3 9,889 36.2 3,759 0.9Satyam Agarwal (Agarwals@MotilalOswal.com)Tel: +91 22 3982 5410/ Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)31 December 2008154

InfrastructureTREND IN ORDER BOOK (RS B)2QFY07 3QFY07 4QFY07 1QFY08 2QFY08 3QFY08 4QFY08 1QFY09 2QFY09 YOY (%)Gammon 80.0 75.0 75.0 80.0 78.0 75.0 80.0 90.0 72.5 -7.1HCC 98.2 96.0 93.1 93.8 96.0 90.5 101.6 102.0 107.7 12.2IVRCL 66.4 72.2 81.0 95.0 96.0 110.0 128.0 124.0 138.0 43.8L&T* 306.8 357.1 368.8 368.8 440.3 496.0 530.0 582.0 628.7 42.8NCC 66.9 70.3 73.0 77.7 90.0 97.5 113.8 121.5 124.2 37.9Patel 50.0 47.7 50.0 50.0 54.0 55.0 60.0 60.0 60.0 11.1Simplex Infrastructure 52.0 43.0 51.0 70.0 70.8 89.0 100.0 100.0 106.7 50.8Total 413.5 404.2 423.1 466.5 484.8 517.0 583.4 597.5 609.1 25.6% Growth (QoQ) -2.2 4.7 10.3 3.9 6.6 12.8 2.4 1.9* Total excluding L&T as size distort the numbers Source: CompaniesTREND IN REVENUE (RS M)3QFY07 4QFY07 1QFY08 2QFY08 3QFY08 4QFY08 1QFY09 2QFY09 3QFY09E YOY %Gammon 4,607 6,207 6,495 4,699 5,227 7,277 5,852 5,389 5,943 13.7HCC 5,407 8,476 7,306 5,487 7,530 10,550 8,659 6,370 9,150 22.0IVRCL 5,223 9,923 6,773 6,885 9,749 13,217 9,285 8,881 12,800 31.3L&T* 41,184 62,482 45,052 54,999 63,827 84,669 59,829 70,764 79,068 23.9NCC 6,998 8,679 7,622 6,772 7,795 12,541 9,709 8,532 10,944 40.4Patel 2,184 3,962 3,301 2,358 2,622 4,664 3,962 2,902 3,274 46.3Simplex Infrastructure 4,257 5,770 5,818 5,711 7,040 8,461 10,167 8,401 10,299 24.9Total 28,676 43,017 37,315 31,912 39,963 56,710 47,634 40,475 52,410 31.1% Growth (QoQ) 50.0 -13.3 -14.5 25.2 41.9 -16.0 -15.0 29.5* Total excluding L&T as size distort the numbers Source: CompaniesREVENUE (RS M) AND EBITDA (%) TREND*60,000Revenue(LHS)EBITDA(%)1645,00030,0008.39.611.99.49.910.711.410.810.110.31210.9815,0004001QFY072QFY073QFY074QFY071QFY082QFY083QFY084QFY081QFY092QFY093QFY09* Excluding L&T as the larger proportion distorts the numbers Source: CompaniesNATURE OF CONTRACTS (% OF ORDER BOOK)Companies like NCC andGammon with higherproportion of fixed pricecontracts will benefit due todecline in commodity prices31 December 2008VARIABLE PRICE (%) FIXED PRICE (%)Gammon India 80 20HCC 95 5IVRCL 92 8L&T 65 35Nagarjuna Construction 64 36Patel Engineering 90 10Simplex 85 15Punj Lloyd 30 70Source: Companies155

InfrastructureExpect borrowings and cost of borrowings to moderateINTEREST COST, % SALES1QFY08 2QFY08 3QFY08 4QFY08 1QFY09 2QFY09 3QFY09E % YOY % QOQGammon 0.7 0.8 0.9 1.7 2.1 2.4 2.4 233.3 3.2HCC 4.2 6.1 5.4 4.4 4.3 6.6 6.6 32.1 9.5IVRCL 0.8 1.1 1.8 1.6 2.1 2.5 2.5 81.0 16.6NCC 1.9 3.4 2.1 1.4 2.5 3.2 3.2 97.4 20.0Patel 0.8 1.2 1.1 2.6 3.7 5.4 5.4 500.4 9.0Simplex Infra 4.2 4.4 4.2 2.2 2.7 3.4 3.4 20.6 10.0Aggregate 2.3 3.0 2.8 2.2 2.8 3.7 3.7 67.3 11.8Source: CompaniesOUTSTANDING DEBT (RS M)FY07 FY08 1HFY09 % INCREASEGammon* 3,715 6,774 11,300 66.8HCC 15,511 18,449 22,000 19.2IVRCL 5,559 10,678 14,500 35.8NCC ** 11,403 8,940 11,580 29.5Patel Engg 3,245 8,900 11,000 23.6Simplex Infra 6,877 7,493 12,500 66.8* Including acquisition loan of Rs3b for FY08 and Rs6b for 1HFY09; **doesn’t including mobilizationadvancesSource: CompaniesNET DER (X) #FY06 FY07 FY08 FY09E FY10E FY11EGammon* 0.3 0.5 0.8 1.3 1.4 1.3HCC** 0.4 1.7 1.8 1.8 1.8 1.8IVRCL 1.2 0.4 0.7 0.9 0.8 0.5NCC 0.2 0.9 0.7 0.9 1.0 1.1Patel Engg 2.0 0.5 0.8 0.8 1.0 1.1Simplex Infra 3.1 3.5 1.6 1.6 1.6 1.6* Includes acquisition debt of Rs6b; **Includes FCCB of Rs4b as debt Source: Companies# Mobilization advances included in debtWe remain positive on the sectorWe remain positive on the construction sector, given the strong revenue visibility (3.2xTTM book to bill), receding concerns on borrowing costs and commodity prices, growthopportunity in the target markets, and inexpensive valuation post recent price corrections.The sector is likely to outperform the market due to superior earnings growth. Our toppicks are IVRCL, NCC, and Simplex.31 December 2008156

InfrastructureStock performance and valuationsSTOCK PERFORMANCE (%)ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARInfrastructureB.L.Kashyap -67 -88 -42 -36 -34 -8Gammon India -43 -87 -18 -34 -10 -7Hindustan Construction -34 -78 -9 -26 0 2IVRCL -39 -74 -14 -22 -5 6Jaiprakash Associates -25 -81 0 -28 8 0Nagarjuna Construction -24 -80 1 -27 9 0Simplex Infra. -53 -73 -28 -21 -20 7Patel Engg. -43 -83 -18 -30 -9 -2RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)102SensexMOSL Infrastructure Index110MOSL Infrastructure IndexSensex87857260573542Sep-08 Oct-08 Nov-08 Dec-0810Dec-07 Mar-08 Jun-08 Sep-08 Dec-08COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EInfrastructureB.L.Kashyap 245 UR 52.6 57.0 66.4 4.7 4.3 3.7 2.7 2.2 1.6 33.1 26.9 25.6Gammon India 79 Neutral 10.5 11.5 14.3 7.5 6.8 5.5 6.0 4.6 4.2 7.5 9.7 10.9Hindustan Construction 51 Buy 2.8 3.3 4.4 18.4 15.5 11.5 7.9 6.7 6.1 7.4 8.0 9.8IVRCL Infra. 144 Buy 15.4 16.8 21.2 9.3 8.6 6.8 7.6 6.8 5.2 14.0 13.1 14.6Jaiprakash Associates 83 Buy 5.2 5.5 6.9 15.9 15.1 12.0 15.7 11.2 9.5 16.3 11.9 11.9Nagarjuna Construction 72 Buy 7.1 8.1 10.5 10.2 8.9 6.9 7.7 7.0 6.1 12.4 11.2 13.2Patel Engg. 175 Neutral 25.5 21.2 23.7 6.9 8.3 7.4 7.7 6.4 6.3 19.1 12.3 12.4Simplex Infra. 174 Buy 18.2 24.7 35.5 9.6 7.1 4.9 5.9 4.6 4.0 13.6 13.1 15.5Sector Aggregate 12.4 11.0 8.7 10.0 7.7 6.6 12.9 11.1 12.6UR = Under Review31 December 2008157

Results PreviewSECTOR: INFRASTRUCTURESTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGKASH INREUTERS CODEBLKS.BO31 December 2008Previous Recommendation: Under ReviewB L KashyapUnder ReviewRs245Equity Shares (m) 20.552-Week Range 2,300/1851,6,12 Rel. Perf. (%) 11/-49/-36M.Cap. (Rs b) 5.0M.Cap. (US$ b) 0.1YEAR NET SALES PAT EPS EPS GR. P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA3/07A 8,081 543 26.4 97.4 20.6 25.33/08A 15,427 1,080 52.6 99.1 4.4 1.3 33.1 37.2 0.3 2.73/09E 18,150 1,172 57.0 8.5 4.3 1.1 26.9 32.4 0.2 2.23/10E 22,208 1,364 66.4 16.4 3.7 0.8 25.6 31.6 0.2 1.6? B L Kashyap commenced 3QFY09 with an order book of about Rs30b, up 58% YoY. However, out of this, ordersworth about Rs10b are from one client, BPTP Ltd, whose SEZ projects in Noida and Faridabad are uncertain.Excluding this, the order book is flat YoY.? We expect B L Kashyap’s 3QFY09 revenue to grow 18% YoY to Rs4.8b. We expect lower margins due to slowdownand competitive pressures. We expect PAT growth of 12.5%.? B L Kashyap’s real estate subsidiary Soul Space Projects (SSPL) is working on five retail projects (2 each inBangalore and Pune, and 1 in Amritsar), 1 commercial project in Bangalore and 2 residential projects in Pune andMohali. SSPL has floated two step-down subsidiaries – Soul Space Retail for joint development projects in Pune andBangalore, and Soul Space Hospitality for a hotel in Amritsar. The NAV of these projects is currently uncertain. Webelieve that the benchmark value for SSPL will be discovered if and when B L Kashyap divests stake to a financial/ strategic partner. Presently, we have not assigned any value to the same.? We have downgraded B L Kashyap’s FY09 earnings by 25% and FY10 earnings by 34%. The stock trades at aP/E of 4.3x FY09E and 3.7x FY10E. Our rating is Under Review.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Income 3,026 3,723 4,058 4,621 4,141 4,044 4,774 5,191 15,427 18,150Change (%) 84.6 118.1 71.8 94.7 36.9 8.6 17.6 12.3 90.9 17.6Total Expenses 2,674 3,283 3,585 4,044 3,649 3,612 4,273 4,617 13,585 16,150EBITDA 352 440 474 577 492 432 501 574 1,842 2,000Change (%) 98.3 141.5 89.7 83.6 39.8 -1.8 5.9 -0.5 99.5 8.5EBITDA Margin (%) 11.6 11.8 11.7 12.5 11.9 10.7 10.5 11.1 11.9 11.0Depreciation 31 38 42 45 45 47 55 66 156 213Interest 34 35 42 50 45 29 43 80 161 197Other Income 102 46 32 39 103 14 30 53 219 200PBT 389 413 421 521 505 370 433 482 1,744 1,790Tax 112 142 169 168 143 128 150 195 591 618Tax/PBT (%) 28.7 34.4 40.1 32.2 28.3 34.5 34.5 40.4 33.9 34.5PAT 278 271 252 353 362 242 284 287 1,154 1,172Adjusted PAT 204 271 252 353 362 242 284 287 1,080 1,172Change (%) 96.6 154.9 63.8 83.7 77.3 -10.5 12.5 -18.7 94.2 8.5PAT Margin (%) 6.7 7.3 6.2 7.6 8.7 6.0 5.9 5.5 7.0 6.5E: MOSL EstimatesShrinath Mithanthaya (ShrinathM@MotilalOswal.com); Tel: +91 22 3982 542131 December 2008158

Results PreviewSECTOR: INFRASTRUCTURESTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGGMON INREUTERS CODEGAMM.BO31 December 2008Previous Recommendation: NeutralGammon IndiaNeutralRs79Equity Shares (m) 114.552-Week Range 845/471,6,12 Rel. Perf. (%) 33/-35/-34M.Cap. (Rs b) 9.0M.Cap. (US$ b) 0.2YEAR NET SALES PAT EPS EPS GR. P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA3/07A 18,647 957 10.8 12.5 7.3 0.6 8.3 11.6 0.5 5.23/08A 23,336 926 10.5 -3.2 7.5 0.6 7.5 10.3 0.4 4.93/09E* 35,050 1,319 11.5 10.1 6.8 0.7 10.1 13.3 0.4 4.63/10E* 42,051 1,633 14.3 23.7 5.5 0.6 11.5 14.3 0.4 4.2* Numbers for merged entity ( including ATSL)? For 3QFY09, we expect Gammon India to report revenue of Rs5.9b, up 13.7% YoY, EBITDA of Rs471m, up 0.6%YoY, and net profit of Rs124m, down 35.6% YoY.? Gammon is facing delays in few of its projects, which had impacted the revenue growth and EBITDA margin during1HFY09. During 2QFY09, the revenue growth was impacted due to delay in work on few projects in Bihar, J&K andAssam. Total projects worth Rs15b largely from transportation are under suspension now. While work on Biharprojects would begin in 2-4 months, there is no timeline for the suspended J&K and Assam projects.? The current order book excluding Rs15b of suspended projects from transportation segment stands at Rs72.5b. Thecurrent order book includes ~14% projects from Gammon Infrastructure Ltd (GIPL). Gammon India had indicatedthat it is eligible to bid for eight NHAI projects valued at Rs18b from the ongoing BOT packages.? ATSL is one of the major players in power transmission in India. During FY08 (9 months), ATSL reported revenue ofRs5.3b and PAT of Rs500m. For FY09, we expect revenue of Rs11b and PAT of Rs681m.? Management has indicated standalone revenue of Rs28b, EBITDA margin of 8%, and net profit of 2.75-3% forFY09. At the consolidated level, Gammon expects to report revenue of Rs38b and net profit of Rs1.4-1.5b.? The stock trades at 6.8x FY09E and 5.5x FY10E earnings. Maintain Neutral.QUARTERLY PERFORMANCE (STANDALONE)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 6,495 4,699 5,227 8,216 5,852 4,807 5,943 9,301 24,636 25,902Change (%) 17.3 -2.7 13.5 32.4 -9.9 2.3 13.7 13.2 17.8 5.1EBITDA 577 412 468 676 498 366 471 762 2,133 2,096Change (%) 82.1 -1.3 -9.2 24.9 -13.7 -11.2 0.6 12.7 23.9 -1.7As of % Sales 8.9 8.8 9.0 8.2 8.5 7.6 7.9 8.2 8.7 8.1Depreciation 108 113 114 126 130 139 146 150 462 565Interest 35 38 48 201 121 155 160 157 322 593Other Income 11 8 4 23 1 20 20 19 45 60Extra-ordinary income 0 0 0 0 386 76 0 0 0 462PBT 444 269 310 371 633 168 185 474 1,394 1,459Tax 159 97 118 137 109 65 61 124 510 359Effective Tax Rate (%) 35.7 36.2 38.0 36.8 17.2 38.7 33.0 26.2 36.6 24.6Reported PAT 285 171 192 235 524 103 124 350 883 1,100Adj PAT 271 171 192 300 138 54 124 350 935 665Change (%) 122.2 -12.8 -20.6 -18.2 -48.9 -68.7 -35.6 16.4 -1.2 -28.8E: MOSL EstimatesSatyam Agarwal (Agarwals@MotilalOswal.com)Tel: +91 22 3982 5410/ Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)31 December 2008159

Results PreviewSECTOR: INFRASTRUCTURESTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGHCC INREUTERS CODEHCNS.BO31 December 2008Previous Recommendation: BuyHindustan ConstructionBuyRs51Equity Shares (m) 256.352-Week Range 279/301,6,12 Rel. Perf. (%) 44/-8/-26M.Cap. (Rs b) 13.0M.Cap. (US$ b) 0.3YEAR NET SALES PAT EPS EPS GR. P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA3/07A 23,576 564 2.0 -39.9 25.7 1.4 5.7 6.6 1.1 12.33/08A 30,828 708 2.8 39.7 18.4 1.3 7.4 11.2 0.9 7.93/09E 37,077 844 3.3 19.2 15.5 1.2 8.0 12.3 0.8 6.73/10E 45,000 1,130 4.4 33.8 11.5 1.1 9.8 11.9 0.7 6.1* Fully Diluted? For 3QFY09, we expect HCC to report revenue of Rs9.2b, up 22% YoY, EBIDTA of Rs1.2b, and net profit ofRs259m, up 31.7% YoY.? During the quarter, HCC has been awarded two new contracts aggregating to Rs 16.9b from Government of AndhraPradesh, Irrigation Department. It also bagged a tunnel order of Rs3.6b from Lanco for the hydropower project.? During 2QFY09, HCC’s order book stood at Rs108b (up 12% YoY, 6% QoQ), book to bill ratio of 2.8x FY09Erevenues. HCC is L1 in 6 projects including 4 water projects and 2 Hydro projects worth Rs52.6b as of September2008. Of this, the company has already received orders of Rs20b in October 2008. As of 2QFY09, order bookcomposition stands at: power 43%, water 27%, transport 27% and others 3%.? During 2QFY09, HCC changed accounting policy for fluctuations in forex rates, and thus foreign currency borrowingsutilized for acquisition of fixed assets will be adjusted in carrying costs of fixed assets. Thus, of the total forex loss ofRs1.1b for 1HFY09, Rs832m will be capitalized and Rs260m charged to P/L. During 1QFY09, HCC had chargedforex loss of Rs506m, of which Rs246m has been written back in 2QFY09.? During 3QFY09, Allahabad Bank invested Rs500m in Lavasa in the form of convertible debentures (on similar termsas that of Axis Bank). Lavasa has achieved pre-sales of Rs7b till September 2008 and has received customeradvances of Rs1.5b. The project has achieved financial closure, post infusion of Rs4.5b through convertible debenturesby Axis Bank, Bank of India and Allahabad Bank.? The stock trades at reported P/E of 15.5x FY09E and 11.5x FY10E. Maintain Buy.QUARTERLY PERFORMANCE31 December 2008(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEGross Sales 7,290 5,487 7,500 10,550 8,659 6,489 9,150 12,778 30,828 37,077Change (%) 25.6 28.9 38.7 24.5 18.8 18.3 22.0 21.1 28.7 20.3EBITDA 791 601 968 1,306 911 837 1,215 1,638 3,666 4,601Change (%) 71.5 52.3 45.9 48.9 15.2 39.2 25.5 25.4 53.0 25.5As of % Sales (Adj) 10.8 11.0 13.0 12.6 10.5 12.9 13.3 12.8 12.0 12.4Depreciation 228 226 233 275 253 296 310 331 962 1,190Interest 322 342 408 452 391 492 539 571 1,524 1,992Other Income 315 106 54 -95 124 268 -68 0 380 325PBT 556 140 381 483 392 317 299 736 1,560 1,744Tax 99 23 130 220 84 117 108 297 472 606Effective Tax Rate (%) 17.8 16.5 34.2 45.4 21.3 37.0 36.0 40.4 30.3 34.8Reported PAT 457 117 251 264 308 199 191 439 1,088 1,138Adj PAT 142 10 197 359 195 -47 259 439 708 844Change (%) -29.3 -75.3 36.9 124.2 37.4 - 31.7 22.3 29.5 19.3E: MOSL Estimates; * includes forex loss/gainSatyam Agarwal (Agarwals@MotilalOswal.com); Tel: +91 22 39825410/Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)160

Results PreviewSECTOR: INFRASTRUCTURESTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGIVRC INREUTERS CODEIVRC.BO31 December 2008Previous Recommendation: BuyIVRCL InfrastructureBuyRs144Equity Shares (m) 129.752-Week Range 575/571,6,12 Rel. Perf. (%) 0/-24/-22M.Cap. (Rs b) 18.6M.Cap. (US$ b) 0.4YEAR NET SALES PAT EPS EPS GR. P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA3/07A 23,465 1,415 10.9 25.5 13.2 1.4 15.7 14.2 0.9 9.53/08A 36,606 2,053 15.4 41.0 9.3 1.2 14.0 14.6 0.8 7.63/09E 49,315 2,423 18.0 16.8 8.0 1.0 14.0 14.2 0.6 6.83/10E 63,724 2,866 21.3 18.3 6.7 0.9 14.5 15.7 0.5 5.2? During FY09 (till date), order intake for IVRCL has been robust at Rs59b, driven by irrigation projects (accounts for~65%+ of order intake). Order book as of September 2008 stands at Rs138b (up 44% YoY).? The increased pace of order intake is being driven by hectic pre-election project award activity in Andhra Pradesh(scheduled for elections in April/May 2009). AP now contributes ~35%+ of order book for IVRCL. During thequarter (till date), company bagged Rs27b worth of orders including Rs17.5b worth of irrigation and water ordersfrom AP.? Gains from lower commodity prices will not be significant, as the company derives ~95% of order book on pricevariation clauses. Also, working capital cycle is expected to improve going forward.? Debt as of September 2008 was Rs14.5b and is expected to increase to Rs16b in FY09. Going forward, we expectdebt levels to be maintained, given improvement in working capital cycle.? For 3QFY09, IVR Prime Urban has had marginal sales and revenue booking, which has impacted operatingperformance and cash flows. Current outstanding advance to IVRCL stands at Rs2.6b, indicating delays in repayment(planned repayment over six half yearly installments).? Over FY08-10, we expect IVRCL to report revenue and earnings CAGR of 24% and 25% respectively. The stocktrades at 8x FY09E and 6.7x FY10E earnings. We recommend Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 6,773 6,885 9,749 13,217 9,285 11,366 12,800 15,864 36,606 49,315Change (%) 58.8 88.9 86.6 33.2 37.1 65.1 31.3 20.0 58.8 34.7EBITDA 600 553 1,084 1,387 820 913 1,216 1,604 3,614 4,553Change (%) 47.5 79.4 94.9 29.3 36.6 65.0 12.2 15.6 57.0 26.0As of % Sales 8.9 8.0 11.1 10.5 8.8 8.0 9.5 10.1 9.9 9.2Depreciation 66 76 87 99 102 113 117 120 328 452Interest 57 76 177 208 194 304 350 412 478 1,260Other Income 10 16 8 11 26 172 12 17 45 227PBT 488 416 829 1,092 550 667 762 1,089 2,853 3,068Tax 108 64 218 359 115 96 168 296 749 675Effective Tax Rate (%) 22.2 15.3 26.3 32.9 20.9 14.4 22.0 27.2 26.2 22.0Reported PAT 380 353 611 733 435 571 594 793 2,105 2,393Adj PAT 380 353 558 733 435 601 594 793 2,053 2,423Change (%) 45.4 127.1 105.7 0.1 14.6 70.5 6.5 8.2 45.2 18.0E: MOSL EstimatesSatyam Agarwal (Agarwals@MotilalOswal.com)Tel: +91 22 3982 5410/ Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)31 December 2008161

Results PreviewSECTOR: INFRASTRUCTURESTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGJPA INREUTERS CODEJAIA.BO31 December 2008Previous Recommendation: BuyJaiprakash AssociatesBuyRs83Equity Shares (m) 1,252.552-Week Range 510/471,6,12 Rel. Perf. (%) 42/-14/-28M.Cap. (Rs b) 104.0M.Cap. (US$ b) 2.1YEAR NET SALES PAT EPS* EPS GR.* P/E* P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA3/07A 34,639 4,149 3.8 48.9 21.9 3.2 14.9 10.8 3.8 15.63/08A 39,670 6,097 5.2 37.5 15.9 2.1 16.3 10.6 4.1 15.73/09E 54,279 6,869 5.5 5.4 15.1 1.5 11.9 10.7 3.0 11.23/10E 80,071 8,659 6.9 26.1 12.0 1.4 11.9 11.8 2.2 9.5* Fully Diluted? For 3QFY09, we expect Jaiprakash to report revenue of Rs13.5b, up 49.9% YoY, EBIDTA of Rs3.5b up 57.6% YoY,and net profit of Rs1.6b, up 1.5% YoY.? JPA has approved amalgamation of its four subsidiaries Viz. Jaypee Cement Ltd (JCL), Gujarat Anjan Cement Ltd(GACL), Jaypee Hotels Ltd (JHL) and Jaiprakash Enterprises Ltd (JEL). Proposed amalgamation will lead to anequity issue of 218m of shares, a dilution of 14.8%. It will also create a “Reserve Stock” of equity shares of JPAwhich can be later monetized to raise funds.? Land for expressway construction has been received up to 80-100kms, v/s 70 kms in September 2008 and leaseagreement for entire 166km is executed in favour of the company. Land for the entire road project is expected by endFY09. Also, for real estate development at NOIDA, total land under possession has increased to 1,080 acres (v/s 914acres as of March 2008) at average cost of Rs2.9m per acre.? We expect JAL to report net profit of Rs6.9b in FY09E (up 12.7% YoY) and Rs8.7b in FY10E (up 26.1% YoY). Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 9,270 8,620 9,000 12,780 11,487 11,825 13,471 17,495 39,670 54,279Change (%) 3.6 11.9 1.0 44.2 23.9 37.2 49.7 36.9 15.3 36.8EBITDA 2,390 2,210 2,230 3,956 3,123 3,477 3,686 4,243 10,786 14,529Change (%) 12.2 11.6 -3.5 50.4 30.6 57.3 65.3 7.3 19.3 34.7As of % Sales 25.8 25.6 24.8 31.0 27.2 29.4 27.4 24.3 27.2 26.8Depreciation 450 460 510 610 622 667 825 992 2,030 3,105Interest 790 840 790 972 984 1,008 1,340 1,571 3,392 4,903Other Income 780 600 1,020 669 394 1,040 750 1,465 3,069 3,649PBT 1,930 1,510 1,950 3,043 1,911 2,843 2,271 3,145 8,433 10,170Tax 530 470 390 946 639 812 727 1,123 2,336 3,301Effective Tax Rate (%) 27.5 31.1 20.0 31.1 33.4 28.6 32.0 35.7 27.7 32.5Reported PAT 1,400 1,040 1,560 2,097 1,273 2,030 1,545 2,022 6,097 6,869Adj PAT 1,400 1,040 1,560 2,097 1,273 2,030 1,545 2,022 6,097 6,869Change (%) 52.2 15.6 52.9 60.1 -9.1 95.2 -1.0 -3.6 46.9 12.7E: MOSL Estimates; excluding Real EstateSatyam Agarwal (Agarwals@MotilalOswal.com); Tel: +91 22 39825410/Nalin Bhatt (NalinBhatt@MotilalOswal.com); +91 22 3982542931 December 2008162

Results PreviewSECTOR: INFRASTRUCTURESTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGNJCC INREUTERS CODENGCN.BO31 December 2008Previous Recommendation: NeutralNagarjuna ConstructionBuyRs72Equity Shares (m) 228.852-Week Range 373/411,6,12 Rel. Perf. (%) 14/-18/-27M.Cap. (Rs b) 16.4M.Cap. (US$ b) 0.3YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 28,711 1,335 6.4 26.1 11.2 1.4 13.5 14.9 0.8 8.93/08A 34,729 1,623 7.1 10.3 10.2 1.0 12.4 12.3 0.8 7.73/09E 44,829 1,842 8.1 14.0 8.9 1.0 11.2 12.3 0.7 7.03/10E 55,131 2,391 10.5 29.8 6.9 0.9 13.2 13.3 0.6 6.1? NCC witnessed order intake of Rs32b during 1HFY09 by strong performance of buildings, water and electricalbusiness. Order book of Rs124b (September 2008, book to bill of 3.1x TTM revenue) provides strong revenuevisibility.? Orders bagged during the quarter include Rs1.2b Golden Jubilee hotel development, Rs4b order from HyderabadWater Supply Board etc.? Management indicated that there are clear indications of slowdown in metals (7% of order book) and refineries (10%of order book), which should impact order intake from these segments going forward. However, there have been nosignificant execution delays in the existing order book.? During 1HFY09, higher proportion of fixed price contracts at ~30% had impacted EBITDA margin (1HFY09 marginat 9.9%, down 154bp). With the recent commodity price corrections, NCC is likely to witness EBITDA marginexpansion.? Management expects revenue growth of 30% during FY09 and 25-30% during FY10. EBITDA margin is likely to be10-10.25% in FY09 (v/s earlier 9.5-10%) and 10.5-10.75% during FY10.? The stock trades at a P/E of 8.9x FY09E and 6.9x FY10E. Upgrade to Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 7,622 6,772 7,795 12,541 9,709 10,558 10,944 13,617 34,729 44,829Change (%) 16.9 3.9 11.4 44.5 27.4 55.9 40.4 8.6 21.0 29.1EBITDA 790 852 862 1,094 916 1,085 1,175 1,417 3,598 4,592Change (%) 43.7 37.8 7.5 50.4 15.9 27.4 36.3 29.5 33.4 27.6As of % Sales 10.4 12.6 11.1 8.7 9.4 10.3 10.7 10.4 10.4 10.2Depreciation 104 117 123 138 142 149 152 157 482 601Interest 145 233 167 174 239 275 330 393 719 1,236Other Income 4 4 11 37 9 10 10 7 56 35PBT 544 505 583 819 544 671 703 873 2,452 2,791Tax 187 165 187 293 173 248 232 296 833 949Effective Tax Rate (%) 34.4 32.7 32.1 35.8 31.8 36.9 33.0 33.9 34.0 34.0Reported PAT 357 340 396 526 371 423 471 577 1,620 1,842Adj PAT 357 340 396 526 371 423 471 577 1,620 1,842Change (%) 9.3 1.7 10.5 55.4 3.9 24.5 18.8 9.6 19.3 13.7E: MOSL EstimatesSatyam Agarwal (Agarwals@MotilalOswal.com)Tel: +91 22 3982 5410/ Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)31 December 2008163

Results PreviewSECTOR: INFRASTRUCTURESTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGPEC INREUTERS CODEPENG.BO31 December 2008Previous Recommendation: NeutralPatel EngineeringNeutralRs175Equity Shares (m) 59.752-Week Range 1,070/1111,6,12 Rel. Perf. (%) 43/-21/-30M.Cap. (Rs b) 10.4M.Cap. (US$ b) 0.2YEAR NET SALES* PAT* EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 10,989 1,122 18.7 28.2 9.3 1.5 24.5 12.9 1.2 9.53/08A 13,174 1,508 25.1 34.4 7.0 1.2 19.1 11.5 1.1 7.73/09E# 15,709 1,262 21.2 -15.8 8.3 1.1 12.3 11.2 1.0 6.43/10E# 18,875 1,414 23.7 12.0 7.4 1.0 12.4 10.8 0.9 6.3* Consolidated; # Assuming full tax rates for FY09 & FY10 for like to like comparision with peers? For 3QFY09, we expect Patel Engineering to report revenue of Rs3.3b, up 24.9% YoY, and net profit of Rs289m,down 17.5%YoY, mainly due to higher interest costs.? During the quarter, Patel Engineering consortium comprising BHEL and Navyuga Engineering has bagged the Pranahita- Chevella Lift Irrigation Package 6 in Andhra Pradesh. The contract value is Rs38.6b, and Patel’s share stands at~35% (~Rs14b). Mobilization is expected to commence post 3QFY10, and we believe that this project will contributeto revenue in a meaningful manner from FY11. EBIDTA margin in the project is expected to be 14-15%, given theincreased complexities and limited competition. This is higher than 9-11% typically on irrigation projects. However, inthe interim, margins in FY10/FY11 are likely to be impacted given the mobilization expenses incurred, while revenuebookings will commence with a time lag.? Current consolidated order book (post inclusion of this project) stands at ~Rs75b, up from Rs60b in March 2008.Book to bill ratio now stands at 3.4x FY09 consolidated revenue.? The subsidiary contribution to the business has been improving with standalone business 70%, US subsidiaries 14%,Michigan 6% and Road JVs 10% during 2QFY09. EBIDTA margin stand as: US subsidiaries 14%, Michigan 15%and Road JVs 8%. Net profit contribution (to the consolidated profit) of subsidiaries/associates has increased to21.3% during 2QFY09, from 8.8% during 2QFY08.? The stock trades at 8.3x FY09E and 7.4x FY10E earnings. We maintain Neutral.QUARTERLY PERFORMANCE (STANDALONE) *31 December 2008(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 3,301 2,358 2,622 5,020 3,962 3,092 3,274 5,591 13,300 15,919Change (%) 13.8 19.1 20.1 26.7 20.0 31.1 24.9 11.4 20.5 19.7EBITDA 358 420 469 829 567 571 584 915 2,077 2,636Change (%) 12.6 36.5 12.1 81.9 58.1 36.0 24.4 10.3 37.4 26.9As of % Sales 10.9 17.8 17.9 16.5 14.3 18.5 17.8 16.4 15.6 16.6Depreciation 66 70 72 120 91 92 98 115 327 396Interest 27 28 30 132 145 163 177 186 216 671Other Income 35 45 30 -61 23 63 20 14 49 120PBT 300 367 398 517 353 380 328 628 1,582 1,690Tax 37 43 48 -21 42 45 39 76 106 203Effective Tax Rate (%) 12.2 11.6 12.0 (4.0) 11.9 11.8 12.0 12.1 6.7 12.0Reported PAT 264 324 350 538 311 335 289 552 1,476 1,487Adj PAT 264 324 350 538 311 322 289 552 1,476 1,473Change (%) 32.1 29.6 20.1 58.4 17.9 -0.9 -17.5 2.7 36.5 -0.2E: MOSL Estimates; Quarterly numbers are based on estimated tax rate for FY09, while header assumes full tax rate for like to likecomparision with peersSatyam Agarwal (Agarwals@MotilalOswal.com)Tel: +91 22 3982 5410/ Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)164

Results PreviewSECTOR: INFRASTRUCTURESTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGSINF INREUTERS CODESINF.BO31 December 2008Previous Recommendation: BuySimplex InfrastructureBuyRs174Equity Shares (m) 55.052-Week Range 774/1081,6,12 Rel. Perf. (%) 24/-31/-21M.Cap. (Rs b) 9.6M.Cap. (US$ b) 0.2YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 17,110 537 12.5 28.9 14.0 2.7 19.5 15.9 0.9 9.33/08A 28,121 1,021 18.2 46.1 9.6 1.1 13.6 18.2 0.5 5.63/09E 42,050 1,415 24.7 35.4 7.1 0.9 13.1 16.4 0.5 4.43/10E 52,563 1,951 35.5 43.9 4.9 0.8 15.5 16.5 0.4 3.8? Order book as of September 2008 stood at Rs107b (+50%YoY), book to bill ratio of 2.5x FY09E revenue. During3QFY09, Simplex continued to witness robust order intake including Rs9b buildings contract from Muscat and Rs6-7b of infrastructure projects in India (Bridge construction in Delhi Rs2b, Goa Shipyard Rs4.8b, etc). Also, in the runup to elections, the management expects order intake in 2HFY09 to be robust.? Our interaction with Simplex management suggests that most of the private projects are insulated from deferments orcancellations due to strong clientele profile. The current order book has 17% orders from industrial segment andanother 27% from the buildings and housing segment (~75% of which is from the Middle East market), part of whichis likely to be at risk due to sharp decline in real estate prices and possible fall of consumption of commodities likesteel/cement etc. However, till date, the management indicated that cancellations have been just to the tune of~Rs200m, 0.2% of the September 2008 order book.? All projects in Middle East have escrow mechanism, which provides a strong safety net to the contractors againstreceivables. Middle East is ~39% of the total outstanding order book.? Over FY08-10, we expect Simplex to report a CAGR of 37% in revenue and 38% in net profit. The stock trades at7.1x FY09E and 4.9x FY10E earnings. We maintain Buy.QUARTERLY PERFORMANCE (STANDALONE)31 December 2008(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Income 5,818 5,711 7,040 9,552 10,167 10,050 10,299 11,535 28,121 42,050Change (%) 65.3 60.3 65.4 65.5 74.7 76.0 46.3 20.8 64.4 49.5Total Expenses 5,236 5,139 6,334 8,737 9,066 9,062 9,259 10,270 25,446 37,656EBITDA 582 572 705 815 1,101 988 1,040 1,265 2,675 4,394Change (%) 83.9 73.0 55.9 57.1 89.2 72.8 47.5 55.1 65.2 64.3As % of Sales 10.8 11.1 10.6 9.6 11.0 10.2 10.4 11.3 10.4 10.8Other Income 44 63 41 98 18 39 35 43 246 135Interest 247 251 296 214 275 324 357 365 1,007 1,320Depreciation 127 142 167 206 255 302 333 354 643 1,244Extraordinary Expenses - - - - (37.5) (22.7) - - - (60.2)PBT 252 242 283 493 552 378 386 589 1,271 1,905As % of sales 4.3 4.2 4.0 5.2 5.4 3.8 3.7 5.1 4.5 4.5Change (%) 109.1 143.0 28.4 89.1 119.2 56.1 36.2 19.5 81.1 50.0Tax 56 52 63 199 169 98 108 175 370 550Tax/PBT (%) 22.2 21.5 22.3 40.3 30.6 25.9 28.0 29.7 29.1 28.9PAT 196 190 220 295 383 280 278 414 901 1,355Adjusted PAT 196 190 220 415 421 303 278 414 1,021 1,415As % of Sales 3.4 3.3 3.1 4.3 4.1 3.0 2.7 3.6 3.6 3.4Change (%) 88.1 169.1 27.4 119.0 114.7 59.2 26.2 (0.2) 90.1 38.6E: MOSL EstimatesSatyam Agarwal (Agarwals@MotilalOswal.com)Tel: +91 22 3982 5410/ Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)165

Results PreviewQUARTER ENDING DECEMBER 2008MediaBSE Sensex: 9,647 S&P CNX: 2,959 31 December 2008COMPANY NAMEDeccan ChronicleH T MediaJagran PrakashanSun TV NetworkTV TodayZee EntertainmentEconomic slowdown has now begun to impact the advertising growth. Slowdown witnessedin key industries like Consumer durables, Retail, Auto, Airline Travel and BSFI (whichtogether contribute 25-30% to the total advertising pie) has led to decline in advertisinggrowth. Among the major advertising mediums, print media would be impacted the mostas its key advertisers like autos, retail, real estate and consumer durables have cut adbudgets.Colors which has raced to become a No2 player in the Hindi general entertainment channel(GEC) space in just its eighth week of launch continues to maintain its position. Recentstrike by Federation of Western India Cine Employees (FWICE) which resulted in no newprograms on the Hindi GEC during the week 46-48 boosted the share of regionalbroadcasters in the Top 100 programs.Newsprint prices which have been on an uptrend since 4QFY08 has shown some signs ofreversal. Domestic newsprint prices have declined by 18% and prices of imported wastepaper is down 50%. Also, the fresh imports of newsprint are happening at 12-15% belowits all time peak of US$950/ton. We have downgraded our earnings estimate of all the printmedia companies under our coverage to factor in slowdown in the advertising revenue.We remain positive on print media segment due to its strong cash flow generation abilityand high entry barriers. We rate Jagran Prakashan as our top pick. We maintain neutralstance on the TV broadcasting industry with neutral rating on Sun TV and ZEEL.Advertising growth slows downEconomic slowdown has now begun to impact the advertising growth. Slowdown witnessedin key industries like Consumer durables, Retail, Auto, Airline Travel and BSFI (whichtogether contribute 25-30% to the total advertising pie) has led to decline in advertisinggrowth. Advertising market is becoming a buyers market with advertisers negotiating forlower ad rates. Further, most of the advertisers are shifting their focus to below the lineadvertising (sales promotion schemes), which has also impacted advertising growthmomentum.EXPECTED QUARTERLY PERFORMANCE SUMMARYAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com) Tel: +91 22 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com); Tel: 3982541831 December 2008RECO SALES EBITDA NET PROFIT(RS MILLION)DEC.08 CHG. (%) DEC.08 CHG. (%) DEC.08 CHG. (%)MediaDeccan Chronicle Buy 2,435 12.6 779 -44.9 443 -57.0H T Media Buy 3,520 10.2 429 -27.5 224 -39.1Jagran Prakashan Buy 2,300 15.6 460 6.5 275 6.4Sun TV Neutral 2,650 21.7 2,094 22.4 1,256 22.8TV Today Buy 825 18.9 290 18.8 185 11.2Zee Entertainment Neutral 5,850 12.9 1,925 22.7 1,388 26.5Sector Aggregate 17,580 14.2 5,977 0.3 3,771 -4.4166

MediaSHARP DECLINE IN PASSENGER CAR GROWTHVOLUME GROWTH NOV 09 YTD NOV 08 YTD FY08Passenger Car 1.0 14.0 12.0Two wheeler 2.9 -12.0 -11.9Source: Company/MOSLAmong the major advertising mediums, print media would be impacted the most as its keyadvertisers like autos, retail, real estate and consumer durables have cut ad budgets. Weexpect deceleration in advertising growth in 2HFY09 on the back of decline in both volumeand ad rate. Other small emerging medium like OOH and event management would alsobe impacted.We believe television advertising growth rate may not witness a sharp decline as FMCGcompanies (biggest advertisers on TV) have been the key driver for the advertising growth.Colors continues to maintain its No2 positionColors which has raced to become a No2 player in the Hindi general entertainment channel(GEC) space in just eight weeks of its launch continues to maintain its position. GRPs ofColors didn’t decline significantly due to strong performance of its reality show Bigg BossSeason 2. Further, its flagship programs (Balika Vadhu and Jai Shri Krishna) continuedto enjoy strong TRP even during the re-runs.GRP RATING FOR WK 48 (FWICE STRIKE) GRP RATING FOR WK 4914010512410298300225263213189703567150758200ColorsZeeTVStarPlusSonyStarPlusColorsZeeTVSonySource:www.Indiatimes.comZEE TV – NO OF PROGRAMS IN TOP 1010864 4 4 443 3 322 2 2221 1 1 11 1110 0 0 0 0 0 0 0 00 00Week 19 Week 22 Week 25 Week 28 Week 31 Week 34 Week 37 Week 40 Week 43 Week 46 Week 49Source:www.Indiatimes.com31 December 2008167

MediaRegional players gain due to no fresh programming on Hindi GECRegional players have been gaining viewership on the back of the rising fragmentation inthe Hindi GEC space. Further, recent strike by FWICE which resulted in no new programson the Hindi GEC during the week 46-48 boosted the share of regional broadcasters in theTop 100 programs. Sun TV which never featured in the Top 10 programs in C&S householdnow has 2 shows. Share of Star Plus and Zee TV declined from 18 and 13 shows forweek 45 to 4 shows each for week 48. Other regional channels grew during this period.We expect regional broadcasters to be better placed then the Hindi broadcasters.CHANNELWISE BREAK-UP OF TOP 100 PROGRAMSWeek 41 42 43 44 45 46 47 48 49SHARE IN TOP 100 4-11 12-18 19-25 26OCT 2-8 9-15 16-22 23-29 30NOV-OCT OCT OCT -1NOV NOV NOV NOV NOV 6DECStar Plus 20 20 19 17 18 11 4 4 16Zee TV 13 15 13 15 13 8 5 4 12Colors 10 9 8 8 9 9 6 5 7Sun TV 23 19 25 29 20 22 24 24 19Sony 5 4 4 5 5 4 4 3 5Gemini TV 13 10 8 11 13 9 12 11 10SET MAX 2 2 3 2 8 9 9 6Zee Marathi 1 2 3 1 3 4 2 3Aaj Tak 12C&S, 4+ All IndiaSource: www.Indiatimes.comNewsprint prices have shown sign of reversalNewsprint prices which have been on an uptrend since 4QFY08 has shown some signs ofreversal. Domestic newsprint prices have declined by 18% and prices of imported wastepaper is down by 50%. Also, the fresh imports of newsprint are happening at 12-15%below its all time peak of US$950/ton. Sliding newsprint prices would ease off the pressureon the operating margins of print media companies.NEWSPRINT PRICES CONTINUE TO RISE (US$/TON)815755695635575Jul-06Sep-06Nov-06Jan-07Mar-07May-07Jul-07Sep-07Nov-07Jan-08Mar-08May-08Jul-08Sep-08Nov-08Source: Bloomberg31 December 2008168

MediaRUPEE-DOLLAR RATE MOVEMENT (RS/US$)5148454239Feb-06Apr-06Jun-06Aug-06Oct-06Dec-06Feb-07Apr-07Jun-07Aug-07Oct-07Dec-07Feb-08Apr-08Jun-08Aug-08Oct-08Dec-08Source: BloombergDowngrading earning estimates of print media companiesWe have downgraded our earnings estimate of print media companies under our coverageto factor in slowdown in the advertising revenue. Although the recent fall in the newsprintprices would improve the operating performance of these companies, lower advertisinggrowth would have a much bigger impact on these companies. Jagran Prakashan wouldbe the able to withstand the downturn due to its regional focus and higher dependence ondomestic newsprint which have begun to correct ahead of the correction in the importednewsprint.REVISED EARNINGS ESTIMATES (RS)OLD ESTIMATE NEW ESTIMATE CHANGE (%)FY09E FY10E FY09E FY10E FY09E FY10EDeccan Chronicle 8.8 12.7 7.7 11.0 -12.5 -13.4HT Media 6.6 8.2 4.7 6.8 -28.8 -17.1Jagran Prakashan 3.6 4.9 3.4 4.9 -5.6 0.0Source: MOSLWe remain positive on print media segment due to its strong cash flow generation abilityand high entry barriers. We rate Jagran Prakashan as our top pick. We maintain neutralstance on the TV broadcasting industry with neutral rating on Sun TV and ZEEL.31 December 2008169

MediaStock performance and valuationsSTOCK PERFORMANCE (%)ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARMediaDeccan Chronicle -48 -80 -23 -28 -26 -18HT Media -28 -72 -3 -20 -6 -10Jagran Prakashan -16 -63 9 -11 6 -1Sun TV -10 -55 15 -3 13 6T V Today 13 -58 38 -5 36 4Zee Entertainment -29 -57 -4 -5 -7 4RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)110SensexMOSL Media Index105MOSL Media IndexSensex95858065654550Sep-08 Oct-08 Nov-08 Dec-0825Dec-07 Mar-08 Jun-08 Sep-08 Dec-08COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EMediaDeccan Chronicle 44 Buy 11.1 7.7 10.7 3.9 5.6 4.1 1.8 2.1 1.3 25.5 16.7 21.1H T Media 72 Buy 6.2 4.7 5.8 11.6 15.3 12.5 6.9 8.3 6.6 15.8 10.8 12.0Jagran Prakashan 59 Buy 3.3 3.4 4.9 18.1 17.4 12.1 10.0 9.7 6.6 18.2 17.8 22.7Sun TV 181 Neutral 9.3 11.5 14.2 19.4 15.6 12.7 10.6 8.3 6.6 25.0 25.3 25.5TV Today 79 Buy 7.5 9.8 12.8 10.5 8.1 6.2 6.0 5.1 3.9 15.1 16.2 18.0Zee Entertainment 140 Neutral 9.3 10.6 13.3 15.0 13.2 10.5 11.6 9.4 8.1 13.5 14.5 15.7Sector Aggregate 13.7 13.2 10.3 8.3 7.6 5.9 18.9 17.1 19.031 December 2008170

Results PreviewSECTOR: MEDIASTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGDECH INREUTERS CODEDCHL.BO31 December 2008Previous Recommendation: BuyDeccan ChronicleBuyRs44Equity Shares (m) 245.052-Week Range 270/381,6,12 Rel. Perf. (%) -5/-31/-28M.Cap. (Rs b) 10.7M.Cap. (US$ b) 0.2YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 5,528 1,614 6.8 105.0 6.4 1.3 19.5 18.5 2.4 5.103/08A 7,824 2,719 11.1 64.5 3.9 1.0 25.5 25.7 1.4 2.203/09E 8,876 1,911 7.7 -30.5 5.6 0.9 16.3 21.1 1.7 4.303/10E 9,463 2,734 11.0 43.0 3.9 0.8 20.5 25.1 1.5 3.2? We expect Deccan Chronicle to post 12.6% YoY growth in revenue to Rs2.4b.? Higher newsprint prices will impact EBITDA margin. We expect EBITDA margin to decline from 65.4% in 3QFY08to 32% in 3QFY09.? DCHL imports 100% of its newsprint requirement and has an inventory level of three months. Hence the benefit ofdecline in newsprint prices would reflect in 4QFY09. However, rupee depreciation would restrict the improvement inoperating performance.? DCHL intends to sell a part or entire stake in its IPL venture, The Deccan Charger Sporting Venture.? PAT is expected to decline by 57% to Rs443m owing to lower EBITDA margin.? The stock is trading at 5.6x FY09E and 3.9x FY10E earnings. We maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 1,734 1,878 2,162 2,051 1,935 2,264 2,435 2,241 7,824 8,876Change (%) 58.1 25.8 47.7 39.0 11.6 20.6 12.6 9.3 41.5 13.5EBITDA 1,037 1,178 1,413 1,232 943 773 779 1,025 4,860 3,520Change (%) 173.2 54.0 99.5 68.6 -9.1 -34.3 -44.9 -16.8 88.1 -27.6As of % Sales 59.8 62.7 65.4 60.1 48.7 34.2 32.0 45.7 62.1 39.7Depreciation 71 66 71 72 73 75 78 87 280 312Interest 130 174 213 251 198 198 170 141 768 707Other Income 103 91 103 83 59 155 120 106 379 440PBT 939 1,029 1,231 992 732 655 651 903 4,191 2,941Tax 101 203 202 966 122 202 208 497 1,471 1,029Effective Tax Rate (%) 10.8 19.7 16.4 97.3 16.7 30.9 32.0 55.0 35.1 35.0Reported PAT 838 826 1,029 26 610 453 443 406 2,719 1,911Adj PAT 838 826 1,029 26 610 453 443 406 2,719 1,911Change (%) 260.2 28.5 112.5 -89.6 -27.2 -45.2 -57.0 1,432.8 68.5 -29.7E: MOSL EstimatesAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com) Tel: +91 22 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com); Tel: 3982541831 December 2008171

Results PreviewSECTOR: MEDIASTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGHTML INREUTERS CODEHTML.BO31 December 2008Previous Recommendation: BuyH T MediaBuyRs72Equity Shares (m) 234.252-Week Range 266/581,6,12 Rel. Perf. (%) -3/1/-20M.Cap. (Rs b) 16.8M.Cap. (US$ b) 0.3YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 10,393 1,156 4.9 91.7 14.6 2.1 14.7 15.3 1.3 7.203/08A 11,862 1,445 6.2 25.3 11.6 1.8 15.8 15.2 1.2 6.103/09E 13,136 1,097 4.7 -24.1 15.3 1.7 10.8 11.6 1.2 7.603/10E 13,809 1,601 6.8 45.9 10.5 1.5 13.9 16.5 1.1 5.2? We expect HT Media to post 10.2% increase in revenue to Rs3.5b.? EBIDTA margin is expected to decline from 18.5% in 3QFY08 to 12.2% in 3QFY09. HT Media will be able to getthe benefit of the newsprint price decline in 4QFY08, as the company maintains an inventory stock of three months.? HT Media continues to expand the reach of its Hindi daily, Hindustan and its business daily, Mint in spite of risingnewsprint prices. Its internet and radio ventures continue to remain under investment mode.? PAT is expected to decline by 30.9% to Rs224m owing to lower EBITDA margin.? The stock is trading at 15.3x FY09E and 10.5x FY10E earnings. We maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 2,733 2,877 3,194 3,134 3,247 3,342 3,520 3,027 11,862 13,136Change (%) 14.3 15.1 16.1 14.0 18.8 16.1 10.2 -3.4 14.1 10.7EBITDA 556 558 592 601 663 399 429 585 2,229 2,076Change (%) 7.1 17.0 20.7 43.8 19.3 -28.3 -23.0 -1.2 16.7 -6.9As of % Sales 20.3 19.4 18.5 19.2 20.0 11.9 12.2 19.3 18.8 15.8Depreciation 106 110 114 117 129 128 128 127 447 512Interest 42 44 45 43 51 74 75 62 177 261Other Income 103 18 87 123 82 52 94 82 407 310PBT 511 422 521 564 565 248 320 479 2,012 1,613Tax 169 97 153 148 188 86 96 146 567 516Effective Tax Rate (%) 33.1 23.0 29.3 26.3 33.3 34.5 30.0 30.5 28.2 32.0Reported PAT 342 325 369 416 377 163 224 333 1,446 1,097Adj PAT 342 325 369 416 377 163 224 333 1,446 1,097Change (%) 10.6 20.7 9.8 73.6 10.4 -52.3 -30.9 -9.8 25.4 -24.1E: MOSL EstimatesAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com) Tel: +91 22 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com); Tel: 3982541831 December 2008172

Results PreviewSECTOR: MEDIASTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGJAGP INREUTERS CODEJAGP.BO31 December 2008Previous Recommendation: BuyJagran PrakashanBuyRs59Equity Shares (m) 301.252-Week Range 169/411,6,12 Rel. Perf. (%) 14/13/-11M.Cap. (Rs b) 17.7M.Cap. (US$ b) 0.4YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 5,982 762 2.5 100.4 23.3 3.5 14.9 18.4 3.0 14.803/08A 7,497 981 3.3 28.7 18.1 3.3 18.2 22.6 2.4 11.103/09E 8,553 1,017 3.4 3.6 17.4 3.1 17.8 21.5 2.1 10.803/10E 9,448 1,468 4.9 44.4 12.1 2.7 22.7 28.4 1.9 7.4? Jagran Prakashan is expected to post 15.6% YoY growth in revenue at Rs2.3b.? EBITDA margin is expected to decline from 21.7% in 3QFY08 to 20% in 3QFY09. The decline would largely be onaccount of rising newsprint price. However, the newsprint prices have begun to decline and the full benefit would bevisible in 4QFY09.? Jagran sources 80% of the newsprint requirement from the domestic market where the prices have declined by 15-18%. We believe the company would be able to get the benefits of the lower prices in the current quarter itself, as thecompany keeps a very low level of inventory (15 days).? We estimate a PAT to grow 6.4% YoY to Rs275m.? The stock is trading at 17.4x FY09E and 12.1x FY10E earnings. We maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 1,834 1,772 1,990 1,900 2,065 2,086 2,300 2,102 7,496 8,553Change (%) 34.2 25.0 27.5 16.1 12.6 17.8 15.6 10.6 25.3 14.1EBITDA 515 390 432 300 496 380 460 357 1,637 1,693Change (%) 49.6 34.2 59.9 2.4 -3.6 -2.6 6.5 18.8 36.6 41.3As of % Sales 28.1 22.0 21.7 15.8 24.0 18.2 20.0 17.0 21.8 19.8Depreciation 70 83 89 94 84 89 100 92 336 364Interest 20 14 14 11 10 12 15 28 60 64Other Income 89 37 56 33 63 55 50 65 215 233PBT 513 330 385 228 466 334 395 302 1,457 1,498Tax 166 110 127 74 150 108 120 104 477 481Effective Tax Rate (%) 32.4 33.3 32.9 33.0 32.1 32.1 32.0 34.3 32.7 32.1Reported PAT 347 220 258 155 316 227 275 198 980 1,017Adj PAT 347 220 258 154 316 227 275 198 980 1,017Change (%) 51.6 25.3 46.0 0.6 -8.8 3.2 6.4 28.6 33.3 3.8E: MOSL EstimatesAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com) Tel: +91 22 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com); Tel: 3982541831 December 2008173

Results PreviewSECTOR: MEDIASTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGSUNTV INREUTERS CODESUTV.BO31 December 2008Previous Recommendation: NeutralSun TV NetworkNeutralRs181Equity Shares (m) 394.152-Week Range 442/1251,6,12 Rel. Perf. (%) 36/-9/-3M.Cap. (Rs b) 71.1M.Cap. (US$ b) 1.5YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 6,788 2,688 6.8 29.9 26.5 2.9 22.1 41.0 9.7 13.53/08A 8,697 3,670 9.3 36.5 19.4 4.8 25.0 44.3 7.7 10.63/09E 10,201 4,548 11.5 23.9 15.6 4.0 25.3 43.3 6.3 8.33/10E 11,927 5,612 14.2 23.4 12.7 3.2 25.5 42.9 5.0 6.6? We expect the company to post revenue of Rs2.6b, up 21.7% YoY; EBITDA of Rs2b, up 22.4% and PAT of Rs1.2b,up 22.8% YoY.? We estimate steady growth in advertising revenue during the quarter. DTH revenue to drive subscription revenues.However, cannibalization due to DTH would result in modest growth in subscription revenue.? Sun TV continues to remain an undisputed leader in southern India with presence across all the four states.Fragmentation in the Hindi GEC space has resulted in a sharp increase in the share of the Sun TV network in the Top100 and Top 10 programs.? The company is in the process of becoming a strong player in the FM radio space.? The stock is trading at 15.6x FY09E and 12.7x FY10E earnings. We maintain Neutral.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 2,023 1,945 2,178 2,465 2,236 2,379 2,650 2,919 8,611 10,184Change (%) 126.3 105.8 91.0 -35.0 10.5 22.3 21.7 18.4 27.2 18.3EBITDA 1,529 1,398 1,710 1,581 1,683 1,763 2,094 2,117 6,219 7,656Change (%) 120.8 95.5 93.5 -37.4 10.0 26.1 22.4 33.9 29.1 23.1As of % Sales 75.6 71.9 78.5 64.1 75.0 74.1 79.0 72.5 72.2 75.2Depreciation 243 248 262 377 278 464 330 251 1,130 1,323Interest 5 15 25 11 0 21 0 -21 56 0Other Income 149 143 142 215 164 165 160 142 649 631Extraoridnary Item 207 207PBT 1,431 1,278 1,565 1,408 1,568 1,650 1,924 2,029 5,682 7,171Tax 500 477 542 494 543 567 667 639 2,012 2,417Effective Tax Rate (%) 34.9 37.3 34.6 35.1 34.6 36.0 34.7 34.7 35.4 33.7Reported PAT 931 802 1,023 915 1,026 1,083 1,256 1,390 3,670 4,754Adj PAT 931 802 1,023 915 1,026 951 1,256 1,390 3,670 4,622Change (%) 120.4 67.1 71.2 -23.1 10.2 18.6 22.8 51.9 36.5 26.0E: MOSL EstimatesAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com) Tel: +91 22 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com); Tel: 3982541831 December 2008174

Results PreviewSECTOR: MEDIASTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGTVTN INREUTERS CODETVTO.BO31 December 2008Previous Recommendation: BuyTV TodayBuyRs79Equity Shares (m) 58.052-Week Range 194/471,6,12 Rel. Perf. (%) 39/17/-5M.Cap. (Rs b) 4.6M.Cap. (US$ b) 0.1YEAR NET SALES PAT* EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 1,889 312 5.4 12.3 14.7 1.8 12.2 18.4 1.7 6.303/08A 2,311 437 7.5 40.1 10.5 1.6 15.1 22.5 1.3 4.903/09E 2,829 543 9.8 29.9 8.1 1.3 16.2 24.4 1.0 3.803/10E 3,349 709 12.8 30.6 6.2 1.1 18.0 27.2 0.6 2.3* Excluding extraordinary items and provisions? We expect the company to post revenue of Rs825m up 18.9% YoY. EBITDA margins are expected to remain flat at35.1%.? Aaj Tak is an undisputed leader in the Hindi news genre in spite of increase competition in this genre. The companycontinues to focus on increasing the reach of Headlines Today which would result in higher expenses on thecarriage fee.? Aaj Tak was a most watched news channel during Mumbai attack which reaffirms the channels strength of apreferred news channel.? Merger of Radio Today awaits clearance from the ministry of Information and Broadcasting.? We believe TV Today is a low-risk investment with strong balance sheet. The stock is trading at 8.1x FY09E and6.2x FY10E earnings. We maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 515 464 694 638 641 669 825 694 2,311 2,829Change (%) 46.7 21.8 21.4 8.9 24.5 44.1 18.9 8.8 22.3 22.4EBITDA 119 78 244 184 131 122 290 177 625 718Change (%) 214.3 29.6 13.1 -9.7 9.9 55.2 18.8 -4.2 20.8 38.7As of % Sales 23.1 16.9 35.1 28.9 21.5 18.2 35.1 25.4 27.1 25.4Depreciation 39 40 40 41 41 42 44 46 160 173Interest 0 0 0 0 0 0 0 0 1 1Other Income 42 44 54 65 45 38 40 167 204 290Extra-ordinary income 0 0 0 0 0 0 0 0 1 0PBT 121 82 257 208 135 118 285 297 667 835Tax 41 29 90 73 43 42 100 108 232 292Effective Tax Rate (%) 33.7 34.7 35.1 35.1 31.8 35.7 35.0 33.0 34.7 35.0Reported PAT 80 54 167 135 92 76 185 190 436 543Adj PAT 80 54 167 135 92 76 185 190 436 543Change (%) 439.9 63.7 18.6 10.3 14.9 41.0 11.2 40.3 39.7 24.5E: MOSL EstimatesAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com) Tel: +91 22 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com); Tel: 3982541831 December 2008175

Results PreviewSECTOR: MEDIAZee Entertainment EnterprisesSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGZ INREUTERS CODEZEE.BO31 December 2008Previous Recommendation: NeutralNeutralRs140Equity Shares (m) 433.652-Week Range 338/931,6,12 Rel. Perf. (%) 22/-2/-5M.Cap. (Rs b) 60.6M.Cap. (US$ b) 1.2YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 15,159 2,426 5.6 12.1 25.0 2.4 9.1 12.8 4.1 19.63/08A 18,354 4,033 9.3 66.2 15.0 2.1 13.5 19.6 3.4 11.63/09E 22,722 4,584 10.6 13.7 13.2 1.9 14.5 21.5 2.8 9.43/10E 26,892 5,782 13.3 26.1 10.5 1.7 15.7 22.7 2.3 8.1? We expect Zee Entertainment Enterprises (ZEEL) to report 12.9% YoY growth in revenue on the back of highersubscription revenue. We expect advertising revenue to grow by 15.6% YoY at Rs3b, while subscription is estimatedto grow by 20.5% YoY to Rs2.3b. PAT is expected to grow by 26.5% YoY at Rs1.3b.? Operating margin is likely to expand by 260bp YoY to 32.9%, as programming cost declines by 4.3% QoQ. Programmingcost would decline due to no fresh programs being telecast in the month of November.? GEC space continues to get fragmented with new launches. Colors has been able to maintain its No.2 position at aGRP of 213 versus Zee TV’s 189 GRP (week 49). We believe increase in fragmentation will have a sharp impact onadvertising revenue due to slowdown in the economy, as the advertisers focus on the Top 3 players.? The stock trades at 13.2x FY09E EPS of Rs10.6 and 10.5x FY10E EPS of Rs13.3. We remain Neutral.QUARTERLY PERFORMANCEAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com) Tel: +91 22 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com); Tel: 3982541831 December 2008(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEAdvertsing Revenue 2,044 2,195 2,638 2,466 2,798 2,851 3,050 2,882 9,307 11,581Subscription Revenue 1,681 1,625 1,950 2,071 2,150 2,244 2,350 2,373 7,436 9,118Other Sales and Services 191 167 594 723 471 621 450 481 1,611 2,023Net Sales 3,916 3,986 5,182 5,260 5,420 5,717 5,850 5,736 18,354 22,722Change (%) 35.3 14.0 24.1 36.8 38.4 43.4 12.9 9.1 21.1 23.8Prog, Transmission & Direct Exp 1,585 1,660 2,549 2,192 2,366 2,613 2,500 2,556 7,818 10,036Staff Cost 375 338 312 406 690 513 525 499 1,438 2,227Selling and Other Exp 759 668 753 1,359 921 1,102 900 881 3,675 3,805EBITDA 1,197 1,321 1,569 1,303 1,443 1,488 1,925 1,799 5,423 6,655Change (%) 80.9 508.1 15.6 36.9 20.5 12.6 22.7 38.1 69.2 22.7As of % Sales 30.6 33.1 30.3 24.8 26.6 26.0 32.9 31.4 29.5 29.3Depreciation 67 55 47 54 55 65 65 100 232 286Interest 118 85 167 184 214 223 210 201 335 848Other Income 213 225 238 435 278 280 350 416 1,138 1,323Extra-ordinary 26 574 792 208 1,366PBT 1,225 1,405 1,592 1,475 2,025 2,271 2,000 1,915 5,786 8,210Tax 412 435 458 430 417 489 660 733 1,634 2,299Effective Tax Rate (%) 33.6 30.9 33.4 29.2 20.6 21.5 33.0 38.3 28.2 28.0Reported PAT 813 971 1,135 1,044 1,608 1,782 1,340 1,182 4,152 5,911Minority Interest 41.9 45.6 38.0 119.9 60.0 -11.0 70.0 208.7 327.7 328PAT after Minority Interest 771 925 1,097 924 1,092 1,001 1,388 1,091 3,825 4,688Change (%) 46.6 316.5 25.3 53.1 41.5 8.2 26.5 18.0 61.0 22.6E: MOSL Estimates176

Results PreviewQUARTER ENDING DECEMBER 2008MetalsBSE Sensex: 9,647 S&P CNX: 2,959 31 December 2008COMPANY NAMEHindalcoHindustan ZincJindal SteelJSW SteelGlobal crude steel production degrew 19% YoY; production rate down23% – steepest ever declineAccording to data released by World Steel Association (WSA), global crude steelproduction declined 19% YoY and 10% MoM to 89m tons in November 2008. Novemberproduction was 23% lower than the average monthly production during January-August2008. Production cut has been steepest in CIS region because its main producing countriesRussia and Ukraine are dependent on exports.NalcoGLOBAL CRUDE STEEL PRODUCTIONMAT Growth RateMonthly ProductionSterlite Industries13013%12011%SAILTata Steelm ton11010090809%7%5%3%MAT Growth Rate70Nov-05May-06Nov-06May-07Nov-07May-08Nov-081%Source: WSAEXPECTED QUARTERLY PERFORMANCE SUMMARYRECO SALES EBITDA NET PROFIT(RS MILLION)DEC.08 CHG. (%) DEC.08 CHG. (%) DEC.08 CHG. (%)MetalsHindalco Sell 41,052 -9.4 6,233 -22.1 3,103 -42.8Hindustan Zinc Buy 13,238 -20.2 4,597 -56.0 4,984 -36.5Jindal Steel & Power Buy 18,295 31.1 5,929 11.4 3,201 0.3JSW Steel Neutral 32,368 13.9 2,843 -63.7 -579 P to LNalco Sell 11,534 4.0 4,254 -3.3 3,090 -6.2Sterlite Inds.* Buy 38,684 -26.1 10,432 -33.6 8,433 -1.4SAIL Sell 100,458 5.4 5,548 -81.9 3,945 -80.0Tata Steel* Buy 332,717 4.3 18,658 -52.7 -4,866 P to LSector Aggregate 588,346 1.1 58,494 -52.0 21,312 -66.9* ConsolidatedSanjay Jain (SanjayJain@MotilalOswal.com);Tel:+9122 39825412/Ashutosh Somani (ashutosh.somani@motilaloswal.com);Tel:+9122 3982542531 December 2008177

MetalsChina, Netherlands and UK production declines sharplyProduction declined 24-27% YoY for Netherlands and UK in November 2008. Novemberproduction was 32% lower than the average production during January-August 2008. Thisis in line with the production cuts announced by Corus. The production of these twocountries is dominated by Corus.Chinese production too declined 12% YoY and 2% MoM to 35.2m tons and was 19%lower than the average production during January-August 2008.In order to align with sharp decline in demand, the steel industry has been able to achievesharp production cuts in such a short span of time due to higher level of consolidation andhigh variable costs (owing to high raw material prices). This has been helpful in preventingpile-up of inventories. According to reports, the inventories in USA and China are atnormal levels, which are reflected in recovery of buying there and little better prices.US steel industry capacity utilization rate below 50%; lowest since 1995Capacity utilization rate of US steel industry has fallen to below 50%, lowest since 1995.Nucor has raised steel prices for January 2009, as supply/demand situation has tighteneddue to production cuts and end of de-stocking. Supply/demand situation in China too isbetter than a month ago due to production cuts and end of de-stocking, which is reflectedin small price recovery.LOWEST CU% IN US SINCE 199510085705540Dec-95Dec-96Dec-97CU (%)Dec-98Dec-99Dec-00Dec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07Dec-08Source: Company/MOSLCoke exports from China too declined sharplyIn October 2008, coke exports from China too declined sharply by 63% YoY to 530,000tonsand average fob realization was US$604/ton (US$621/t in September). Local prices ofcoke have fallen to US$264/ton (peak of US$460/ton), which implies that China would bewilling to export coke at US$450/ton on fob basis after paying export duty of 40%. Shanxi,hub of coke-ovens in China, is going to step up production cut from 40% in October to70% in November to underpin prices.31 December 2008178

MetalsSPOT PRICES OF IRON ORE 63.5% GRADE (US$/TON)215Chinese cfr spot priceIndian fob spot price1701258035Dec-04Mar-05Jun-05Sep-05Dec-05Mar-06Jun-06Sep-06Dec-06Mar-07Jun-07Sep-07Dec-07Mar-08Jun-08Sep-08Dec-08CHINESE PIG IRON PRODUCTION DEGREW - 1ST TIME IN 8 YEARSPrices (US$/ton)800600400200Coke Prices (fob China)Coke price ForcastCoking Coal (fob Australia)Coking coal price forcast0Jun-01Jul'02Mar-03Jul-03Nov-03Mar-04Jul-04Nov-04Mar-05Jul-05Nov-05Mar-06Jul-06Nov-06Mar-07Jul-07Nov-07Mar-08Jul-08Nov-08Mar-09Jul-09Source: ISI/ MOSLHRC prices have bottomed - consensus among Indian steel producersThere seems to be consensus among the industry players that steel prices may not fallfurther from here though a significant recovery is ruled out. Presently, HRC is being soldin the range of Rs24,000-26,000/ton. Some of the Indian steel producers are saying thatBHP-Billiton has indicated to them a price of

MetalsIndian companies too are running low on capacity utilizationCurrently, capacity utilization of Ispat Industries is 30%, JSW Steel and Essar Steel is 60-70% each, and Bhushan Steel is 50%. SAIL and Tata steel have not announced productioncuts but they have brought forward repairs.Tata Steel’s November production of 570ktons was the highest everTata Steel’s November production of 570ktons was the highest ever despite three of itssmaller blast furnaces under relining. Currently, four smallest blast furnaces A, B, C and Dare under relining / revamping. New H furnace is more than compensating for the productionloss. B & C were shut in June 2008. A was shut by end of September 2008, while D hasbanked in the month of November 2008. B is now ready post relining, while A’s 9-monthrevamping will be completed by February 2009. Hot strip mill was also under capital repairfrom 22 November-17 December 2008.JSW Steel announced production cut of 20%Though JSW Steel announced production cut of 20%, actual production rates have beenworse in November 2008. Start up of new blast furnace has been further postponed untilrecovery of market conditions. Company held inventories of 92,000 tons of saleable steel,which has not reduced much despite production cuts. JSW Steel is committed to its expansionto 7mtpa, which has pending capex of Rs3b. However, it has put on hold further expansionto 10mtpa at capex of Rs55b, while Rs15b has been spent so far. Net debt is aroundRs136b.Import duty of 5% restored; domestic HRC prices to fall further by Rs4,000/ton by JanuaryIndian government restored import duty of 5% to deter cheaper imports, though industryalong with steel ministry had been lobbying for 10% duty. DEPB benefits on re-export toohave been restored. Also, export duties of 15% on pig iron, semis, and long productionswere withdrawn few weeks ago. This marks the complete roll-back of fiscal measurestaken during 2008 to curb extreme volatility of steel prices in the domestic market. HRCimports have been restricted to end use only. As a result, imports by traders have becomedifficult. We believe this will improve business sentiments as uncertainty over duties fades.OutlookWe believe that the steel market is yet to stabilize and raw material prices have to correctsharply in next round of negotiations because steel producers have resorted to large scaleproduction cuts to align with the weak demand. Scrap and billet prices appear to havebottomed out but we don’t expect much of rally as demand remains weak. There arechances of market stabilizing in first quarter of 2009. We have Buy rating on Jindal Steel& Power and Tata Steel and Sell rating on SAIL and Sesa Goa.31 December 2008180

MetalsThe margins of steel producers will be under severe pressure in 2HFY09 due to high costof coking coal (US$300-350/t). Coking coal prices too are likely to correct sharply in 2009due to sharp drop in steel production. Coke demand has weakened drastically and priceshave fallen further to US$315/ton (peak of US$760/ton) fob (Chinese ports) during lastweek.EPS REVISIONSCOMPANIES CMP MCAP OLD EPS (RS) REV EPS (RS) REV EPS GR (%) P/E (X) RATING(RS) (RS B) FY09 FY10 FY09 FY10 FY09 FY10 FY09 FY10 OLD NEWHindalco 51 89 11.9 6.1 9.6 2.0 -40.4 -78.8 5.3 24.9 Sell SellHindustan Zinc 338 143 79.1 49.8 66.6 47.4 -36.0 -28.8 5.1 7.1 Buy BuyJindal Steel 830 128 178.9 186.8 178.9 192.1 102.1 7.4 4.6 4.3 Buy BuyJSW 247 46 51.2 126.2 42.4 90.5 -51.1 113.7 5.8 2.7 Neutral NeutralNalco 196 126 25.1 22.3 23.0 13.0 -10.3 -43.5 8.5 15.1 Sell SellSAIL 79 328 15.1 11.8 13.4 11.8 -34.5 -12.3 5.9 6.7 Sell SellSesa Goa 87 68 23.3 19.9 23.3 14.1 18.9 -39.6 3.7 6.2 Sell SellSterlite 250 177 65.3 40.0 63.0 39.0 -1.5 -38.1 4.0 6.4 Buy BuyTata Steel 225 185 75.7 85.1 101.5 85.1 7.8 -16.2 2.2 2.6 Buy BuySource: MOSLWe are factoring in coking coal prices of US$150/ton in our models for SAIL, JSW Steel,Tata Steel and Jindal Steel & Power from July 2009. According to our recent interactionwith the industry, the domestic demand for long products and semis have picked up, whichis reflected in prices. After falling to Rs25,000/ton (excl. taxes), prices of TMT bars andother long products have recovered to Rs31,000/ton (peak prices of Rs40,000/ton). JindalSteel & Power is our top pick.We have revised our assumption for aluminium from US$2,000/ton for 4QFY09 and FY10to US$1,500/ton and from US$1,600/ton respectively. Zinc price assumption has beenrevised from US$1,500/ton to US$1,200/ton. Consequently, we have downgraded our EPSestimates for Hindalco, Hindustan zinc, Nalco and Sterlite for both FY09 and FY10.AVERAGE LME PRICES (US$/TON)QUARTER ZINC ALUMINIUM COPPER LEAD ALUMINAAVG. QOQ % YOY % AVG. QOQ % YOY % AVG. QOQ % YOY % AVG. QOQ % YOY % AVG. QOQ % YOY %3QFY09 1,219 -32 -54 1,891 -33 -24 3,962 -48 -45 1,270 -34 -61 279 -32 -192QFY09 1,798 -16 -44 2,839 -5 9 7,571 -9 -1 1,915 -18 -38 408 -1 171QFY09 2,150 -13 -42 2,995 8 7 8,323 8 10 2,330 -20 7 411 5 144QFY08 2,460 -8 -29 2,779 11 1 7,741 7 30 2,900 -10 66 391 14 213QFY08 2,664 -17 -36 2,500 -4 -8 7,259 -5 2 3,232 4 104 343 -1 432QFY08 3,221 -12 -4 2,610 -7 3 7,624 1 0 3,094 42 159 347 -4 21QFY08 3,679 7 14 2,802 2 4 7,578 27 6 2,184 25 95 360 12 -384QFY07 3,441 -17 52 2,748 1 12 5,975 -16 23 1,751 10 43 322 34 -473QFY07 4,142 23 152 2,726 8 32 7,096 -7 72 1,587 33 57 240 -29 -552QFY07 3,359 4 155 2,531 -6 37 7,628 7 115 1,194 7 37 340 -42 -211QFY07 3,239 43 152 2,684 10 50 7,158 47 123 1,119 -9 18 583 -4 34Source: Company/MOSL31 December 2008181

MetalsStock performance and valuationsSTOCK PERFORMANCE (%)ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARMetalsHindalco -47 -74 -22 -21 -7 -2Hindustan Zinc -21 -59 4 -6 19 13Jindal Steel & Power -28 -70 -3 -18 13 1JSW Steel -52 -83 -27 -30 -12 -11Nalco -48 -61 -24 -9 -8 10SAIL -39 -73 -15 -20 1 -1Sterlite Inds. -39 -75 -14 -22 1 -3Tata Steel -49 -77 -24 -24 -9 -5RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)102SensexMOSL Metals Index100MOSL Metals IndexSensex87807260574042Sep-08 Oct-08 Nov-08 Dec-0820Dec-07 Mar-08 Jun-08 Sep-08 Dec-08COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EMetalsHindalco 52 Sell 16.1 9.6 2.0 3.2 5.4 25.4 1.4 1.4 2.0 36.6 14.3 3.0Hindustan Zinc 338 Buy 104.0 66.6 47.4 3.3 5.1 7.1 1.2 1.4 1.5 37.1 18.8 12.0Jindal Steel & Power 912 Buy 88.6 178.9 192.1 10.3 5.1 4.7 8.6 4.5 4.3 35.4 44.2 32.4JSW Steel 230 Neutral 86.7 42.4 90.5 2.6 5.4 2.5 4.9 7.4 5.5 21.3 10.2 18.5Nalco 190 Sell 25.6 23.0 13.0 7.4 8.3 14.6 3.9 4.6 8.4 0.5 0.4 0.3SAIL 77 Sell 20.5 13.4 11.8 3.8 5.8 6.6 1.7 2.7 3.8 36.4 20.4 15.6Sterlite Inds. 261 Buy 64.0 63.0 39.0 4.1 4.1 6.7 0.9 0.4 0.5 28.5 22.2 13.0Tata Steel 217 Buy 94.2 101.5 85.1 2.3 2.1 2.5 3.7 3.6 3.8 48.4 36.8 25.7Sector Aggregate 3.8 4.4 5.4 2.7 3.1 3.6 24.6 18.0 13.031 December 2008182

Results PreviewSECTOR: METALSHindalcoSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGHNDL INREUTERS CODEHALC.BOEquity Shares (m) 1,752.152-Week Range 201/381,6,12 Rel. Perf. (%) -9/-32/-21M.Cap. (Rs b) 90.5M.Cap. (US$ b) 1.931 December 2008YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 193,161 28,014 24.2 77.6 2.1 0.5 21.9 15.9 0.3 1.33/08A 600,128 19,803 16.1 -33.2 3.2 1.2 36.6 7.4 0.5 4.13/09E 606,428 16,864 9.6 -40.4 5.4 0.8 14.3 8.1 0.4 3.53/10E 454,741 3,567 2.0 -78.8 25.4 0.8 3.0 4.1 0.5 4.6SellPrevious Recommendation: SellRs52Consolidated? For 3QFY09, we expect standalone PAT to decrease 42.8% YoY to Rs3.1b due to steep decline in aluminium prices.Aluminium volumes are expected to increase 8% YoY to 132ktons, while copper volumes are expected to remain flatat 80ktons.? EBITDA is expected to decline 22% YoY to Rs6.2b and margins are likely to contract 250bp to 15.2 % due to fallingprices on the LME.? We have downgraded our FY09 and FY10 EPS estimates by 19% and 67% respectively. We expect an EPS ofRs9.6 during FY09 assuming an average price of US$1,500/ton for 4QFY09 and EPS of Rs2 for FY10 assumingUS$1,600/ton. The stock trades 5.4x FY09E P/E and 3.5x FY09E EV/EBITDA. Maintain Sell.QUARTERLY PERFORMANCE (STANDALONE)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 46,779 49,597 45,317 50,102 46,475 56,366 41,052 40,315 191,795 184,208Change (YoY %) 9.5 7.0 -2.7 5.5 -0.6 13.6 -9.4 -19.5 4.7 -4.0Total Expenditure 37,936 40,380 37,311 42,135 36,985 46,898 34,818 36,891 157,762 155,592EBITDA 8,843 9,217 8,006 7,967 9,490 9,468 6,233 3,424 34,033 28,616Change (YoY %) -5.3 -6.6 -23.4 -28.5 7.3 2.7 -22.1 -57.0 -16.6 -15.9As % of Net Sales 18.9 18.6 17.7 15.9 20.4 16.8 15.2 8.5 17.7 15.5Interest 562 632 622 988 761 855 1,188 1,761 2,804 4,566Depreciation 1,428 1,446 1,460 1,516 1,568 1,592 1,607 1,623 5,850 6,390Other Income 1,246 1,098 1,143 1,442 2,147 2,234 700 700 4,929 5,781PBT (before EO Item) 8,099 8,237 7,067 6,905 9,308 9,255 4,138 739 30,308 23,440Extra-ordinary Income - - - 5,412 - - - - 5,412.0 -PBT (after EO item) 8,099 8,237 7,067 12,317 9,308 9,255 4,138 739 35,720 23,440Total Tax 2,070 1,809 1,640 1,542 2,340 2,056 1,034 163 7,061 5,593% Tax 25.6 22.0 23.2 22.3 25.1 22.2 25.0 22.0 19.8 23.9Reported PAT 6,029 6,428 5,427 10,775 6,968 7,200 3,103 577 28,659 17,847Adjusted PAT 6,029 6,428 5,427 5,363 6,968 7,200 3,103 577 24,317 17,847Change (YoY %) 0.2 -1.0 -15.7 -30.4 15.6 12.0 -42.8 -89.2 -8.8 -26.6E: MOSL EstimatesSanjay Jain (SanjayJain@MotilalOswal.com);Tel:+9122 39825412/Ashutosh Somani (ashutosh.somani@motilaloswal.com);Tel:+9122 3982542531 December 2008183

Results PreviewSECTOR: METALSSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGHZ INREUTERS CODEHZNC.BO31 December 2008Previous Recommendation: BuyHindustan ZincBuyRs338Equity Shares (m) 422.552-Week Range 843/2151,6,12 Rel. Perf. (%) -1/-8/-6M.Cap. (Rs b) 143.0M.Cap. (US$ b) 2.9YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 85,602 44,418 105.1 201.7 3.2 1.9 58.2 78.8 1.1 1.53/08A 78,778 43,961 104.0 -1.0 3.3 1.2 37.1 41.9 0.8 1.23/09E 61,512 28,156 66.6 -36.0 5.1 1.0 18.8 16.6 0.6 1.43/10E 52,930 20,044 47.4 -28.8 7.1 0.9 12.0 9.6 0.5 1.5Standalone? For 3QFY09, we expect net sales to decrease 20.2% YoY to Rs13.2b due to lower zinc prices on the LME despite44% YoY volume growth. Revenues from by-product too will decline due to sharp fall in sulphuric acid prices.? EBITDA is expected to decline 56% YoY to Rs4.6b and margins to contract 28pp to 34.7% due to falling prices onthe LME.? Profit after tax is likely to decrease 36.5% YoY to Rs5b.? We have downgraded our FY09 and FY10 estimates by 16% and 5% respectively on our new metal price assumptions.Average zinc prices have been revised to US$1,200/ton (earlier US$1,500/ton) for 3Q FY09 and US$1150/ton for 4QFY09. Now, we expect an EPS of Rs66.6 in FY09 and Rs47.4 in FY10. Maintain Buy.QUARTERLY PERFORMANCE (STANDALONE)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 19,700 19,840 16,580 22,660 16,437 17,905 13,238 13,933 78,780 61,512Change (YoY %) 22.4 -18.7 -33.1 12.1 -16.6 -9.8 -20.2 -38.5 -8.0 -21.9Total Expenditure 5,340 5,650 6,140 7,850 6,660 8,084 8,641 9,361 24,980 32,746EBITDA 14,360 14,190 10,440 14,810 9,777 9,821 4,597 4,572 53,800 28,767Change (YoY %) 15.4 -23.5 -45.3 5.8 -31.9 -30.8 -56.0 -69.1 -16.0 -46.5As % of Net Sales 72.9 71.5 63.0 65.4 59.5 54.8 34.7 32.8 68.3 46.8Interest 70 60 60 50 69 71 63 48 240 250Depreciation 450 490 540 740 686 704 706 806 2,220 2,902Other Income 2,700 1,440 1,110 3,260 2,094 1,807 2,250 2,500 8,510 8,651PBT 16,540 15,080 10,950 17,280 11,116 10,853 6,078 6,218 59,850 34,265Total Tax 4,690 3,600 3,100 4,500 2,638 1,257 1,094 1,119 15,890 6,109% Tax 28.4 23.9 28.3 26.0 23.7 11.6 18.0 18.0 26.5 17.8Reported PAT 11,850 11,480 7,850 12,780 8,478 9,595 4,984 5,099 43,960 28,156Adjusted PAT 11,850 11,480 7,850 12,780 8,478 9,595 4,984 5,099 43,960 28,156Change (YoY %) 35.6 -11.6 -41.2 36.7 -28.5 -16.4 -36.5 -60.1 -1.0 -36.0E: MOSL EstimatesSanjay Jain (SanjayJain@MotilalOswal.com);Tel:+9122 39825412/Ashutosh Somani (Ashutosh.Somani@motilaloswal.com);Tel:+9122 3982542531 December 2008184

Results PreviewSECTOR: METALSSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGJSP INREUTERS CODEJNSP.BO31 December 2008Previous Recommendation: BuyJindal Steel & PowerBuyRs912Equity Shares (m) 154.052-Week Range 3,356/5171,6,12 Rel. Perf. (%) 22/-20/-18M.Cap. (Rs b) 140.4M.Cap. (US$ b) 2.9YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 35,198 6,920 44.9 22.6 20.3 5.5 27.1 12.6 5.5 13.93/08A 54,890 13,634 88.6 97.0 10.3 3.6 35.4 16.6 3.7 8.63/09E 102,074 27,548 178.9 102.1 5.1 2.3 44.2 26.3 2.1 4.53/10E 106,227 29,575 192.1 7.4 4.7 1.5 32.4 21.0 2.0 4.3Consolidated? For 3QFY09, we expect net sales to grow 31% YoY to Rs18.3b, driven by volume growth in steel business.? EBITDA is likely to increase 11.4% YoY to Rs5.9b. Post-tax adjusted profit is likely to remain flat at Rs3.2b.? Our EPS estimates for FY09 and FY10 are Rs178.9 and Rs192.1 respectively. Consolidated EPS is expected toincrease at a CAGR of 47% over FY08-FY10E. Our SOTP valuation is Rs1,443. Maintain Buy.QUARTERLY PERFORMANCE (STANDALONE)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 12,231 12,690 13,956 15,230 18,953 22,161 18,295 19,042 54,108 78,452Change (YoY %) 83.6 60.7 38.2 44.5 55.0 74.6 31.1 25.0 53.7 45.0Total Expenditure 7,440 7,284 8,633 8,437 11,128 13,610 12,366 12,871 31,332 49,975EBITDA 4,792 5,407 5,324 6,793 7,825 8,551 5,929 6,171 22,775 28,477Change (YoY %) 47.5 75.3 41.1 73.4 63.3 58.2 11.4 -9.1 62.4 25.0As % of Net Sales 39.2 42.6 38.1 44.6 41.3 38.6 32.4 32.4 42.1 36.3Interest 621 791 500 603 475 563 591 356 2,086 1,985Depreciation 1,115 1,178 1,188 1,035 1,057 1,077 1,206 1,299 4,515 4,639Other Income 96 29 118 248 74 150 25 26 491 275PBT (before EO item) 3,152 3,467 3,754 5,402 6,368 7,061 4,157 4,542 16,666 22,127Extra-ordinary Income 250 - - (1,000) (770) (1,106) - - (1,640) (1,876)PBT (after EO item) 3,402 3,467 3,754 4,402 5,598 5,955 4,157 4,542 15,025 20,251Total Tax 901 692 564 499 1,575 1,455 956 672 2,656 4,658% Tax 26.5 20.0 15.0 11.3 28.1 24.4 23.0 14.8 17.7 23.0Reported PAT 2,501 2,775 3,191 3,903 4,023 4,500 3,201 3,870 12,370 15,593Adjusted PAT 2,317 2,775 3,191 4,792 4,576 5,336 3,201 3,870 13,720 17,038Change (YoY %) 51.4 76.5 68.0 136.3 97.5 92.3 0.3 -19.2 95.2 24.2E: MOSt EstimatesSanjay Jain (SanjayJain@MotilalOswal.com);Tel:+9122 39825412/Ashutosh Somani (Ashutosh.Somani@motilaloswal.com);Tel:+9122 3982542531 December 2008185

Results PreviewSECTOR: METALSJSW SteelSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGJSTL INREUTERS CODEJSTL.BOEquity Shares (m) 187.152-Week Range 1,366/1701,6,12 Rel. Perf. (%) 16/-46/-30M.Cap. (Rs b) 42.9M.Cap. (US$ b) 0.931 December 2008NeutralPrevious Recommendation: NeutralRs230YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 85,944 12,339 75.2 99.8 3.0 0.7 24.1 21.0 0.9 2.93/08A 123,455 16,211 86.7 15.2 2.6 0.6 21.3 12.1 1.3 4.93/09E 174,494 7,924 42.4 -51.1 5.4 0.6 10.2 7.8 1.4 7.43/10E 216,143 16,934 90.5 113.7 2.5 0.5 18.5 11.8 1.3 5.5Consolidated? We expect net sales to grow 13.9% YoY to Rs32.4b. We expect volume growth of 7.5% YoY, while realizationswould grow 5.9% YoY.? EBITDA is likely to decline 63.7% YoY to Rs2.8b. Margins would decline ~19pp YoY to 8.8% due to coking coal costpressures. We expect a net loss of ~Rs580m as compared to a PAT of Rs3.7b in 3QFY08.? We estimate an EPS of Rs42.4 for FY09 and Rs90.5 for FY10. The stock trades at an EV/EBITDA of 7.4xFY09E.Maintain Neutral.QUARTERLY PERFORMANCE (STANDALONE)(RS MILLION)Y/E MARCH FY08 FY09 FY08* FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales (tons) 677,500 804,808 817,500 906,500 817,000 837,000 878,800 1,200,000 3,206,308 3,732,800Change (YoY %) 24.8 22.7 18.8 15.6 20.6 4.0 7.5 32.4 113.8 16.4Realization (Rs per ton) 35,209 33,476 34,764 37,782 44,938 51,006 36,832 33,401 35,388 40,681Change (YoY %) 21.8 0.1 3.9 18.6 27.6 52.4 5.9 -11.6 -38.0 15.0Net Sales 23,854 26,942 28,419 34,250 36,714 42,692 32,368 40,081 113,465 151,855Change (YoY %) 52.0 22.8 23.5 37.1 53.9 58.5 13.9 17.0 32.5 33.8Total Expenditure 16,115 18,276 20,579 25,507 28,121 31,789 29,525 36,630 80,476 126,065EBITDA 7,740 8,666 7,841 8,743 8,593 10,904 2,843 3,451 32,989 25,790Change (YoY %) 69.8 24.5 1.9 8.9 11.0 25.8 -63.7 -60.5 21.1 -21.8As % of Net Sales 32.4 32.2 27.6 25.5 23.4 25.5 8.8 8.6 29.1 17.0EBITDA (Rs per ton) 11,424 10,768 9,591 9,645 10,518 13,027 3,235 2,875 10,289 6,909Interest 1,027 866 1,169 1,335 1,531 1,960 1,999 2,810 4,397 8,300Depreciation 1,467 1,508 1,883 1,829 1,852 1,975 2,015 3,396 6,687 9,238Other Income 349 627 356 325 273 426 426 426 1,657 1,550PBT (before EO Item) 5,595 6,919 5,145 5,904 5,483 7,394 -745 -2,329 23,562 9,803EO Items 1,139 759 3 -655 -2,266 -2,684 0 0 1,245 -4,950PBT (after EO Item) 6,734 7,679 5,148 5,248 3,217 4,711 -745 -2,329 24,808 4,853Total Tax 2,049 2,337 1,338 2,372 1,024 1,536 -238 -745 8,095 1,577% Tax 30.4 30.4 26.0 45.2 31.8 32.6 32.0 32.0 32.6 32.5Reported PAT 4,685 5,342 3,810 2,876 2,193 3,175 -507 -1,584 16,712 3,277Adjusted PAT 3,820 4,741 3,735 3,163 3,665 4,911 -579 -1,656 15,583 6,329Change (YoY %) 134.3 39.8 5.2 -15.9 -4.0 3.6 -115.5 -152.4 26.3 -59.4E: MOSL Estimates; * We have excluded SISCOL’s financials from reported FY08 4Q stand-alone & have adjusted Rs1.39b misc exp. w/off for 1Q to 4Q of FY08Sanjay Jain (SanjayJain@MotilalOswal.com);Tel:+9122 39825412/Ashutosh Somani (Ashutosh.Somani@motilaloswal.com);Tel:+9122 3982542531 December 2008186

Results PreviewSECTOR: METALSSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGNACL INREUTERS CODENALU.BO31 December 2008Previous Recommendation: SellNalcoSellRs190Equity Shares (m) 644.352-Week Range 566/1081,6,12 Rel. Perf. (%) 4/-17/-9M.Cap. (Rs b) 122.3M.Cap. (US$ b) 2.5YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 59,402 23,926 37.1 55.1 5.1 1.6 31.1 38.9 1.4 2.43/08A 49,888 16,483 25.6 -31.1 7.4 1.4 18.6 20.4 1.7 3.93/09E 51,618 14,788 23.0 -10.3 8.3 1.2 14.9 17.0 1.9 4.63/10E 44,033 8,362 13.0 -43.5 14.6 1.2 8.0 6.5 2.2 8.4Standalone? We expect net sales to increase 4% YoY to Rs11.5b on the back of a 3% YoY increase in aluminium volumes and a24% YoY decrease in aluminum prices on the LME.? EBITDA is expected to decline 3.3% YoY to Rs4.3b primarily on account of strong metal prices. Profit after tax islikely to decline 6.2% YoY to Rs3.1b.? We have recently downgraded EPS estimates for FY09 and FY10 respectively by 8.3% and 42% respectively onaccount of change in price assumption to US$1,600/ton (earlier US$2,000/ton). We estimate an EPS of Rs23 forFY09 and Rs13 for FY10. The stock trades at 8.3x FY09E EPS. Maintain Sell.QUARTERLY PERFORMANCE (STANDALONE)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 11,652 13,082 11,093 14,057 14,675 15,364 11,534 10,045 49,884 51,618Change (YoY %) -21.6 -9.3 -23.4 -10.3 25.9 17.4 4.0 -28.5 -16.0 3.5Total Expenditure 5,488 7,397 6,693 8,030 7,307 8,957 7,281 7,357 27,607 30,900EBITDA 6,164 5,685 4,401 6,028 7,368 6,408 4,254 2,688 22,277 20,718Change (YoY %) -34.0 -35.0 -47.9 -31.5 19.5 12.7 -3.3 -55.4 -37.1 -7.0As % of Net Sales 52.9 43.5 39.7 42.9 50.2 41.7 36.9 26.8 44.7 40.1Interest 1 6 0 0 4 1 0 0 -7 5Depreciation 692 683 662 758 679 696 711 813 2,794 2,899Other Income 1,310 1,644 1,380 1,350 1,262 1,181 1,187 1,187 5,683 4,816PBT (before EO Item) 6,782 6,639 5,118 6,620 7,948 6,892 4,729 3,062 25,173 22,631Extra-ordinary Income -357 0 0 0 0 -254 0PBT (after EO Item) 6,782 6,639 5,118 6,263 7,948 6,892 4,729 3,062 24,919 22,631Total Tax 2,315 2,242 1,824 2,173 2,694 2,447 1,640 1,061 8,553 7,843% Tax 34.1 33.8 35.6 34.7 33.9 35.5 34.7 34.7 34.3 34.7Reported PAT 4,467 4,397 3,294 4,091 5,253 4,445 3,090 2,000 16,366 14,788Adjusted PAT 4,467 4,397 3,294 4,324 5,253 4,445 3,090 2,000 16,533 14,788Change (YoY %) -28.2 -26.1 -42.5 -26.8 17.6 1.1 -6.2 -53.7 -30.9 -10.6E: MOSL EstimatesSanjay Jain (SanjayJain@MotilalOswal.com);Tel:+9122 39825412/Ashutosh Somani (Ashutosh.Somani@motilaloswal.com);Tel:+9122 3982542531 December 2008187

Results PreviewSECTOR: METALSSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGSTLT INREUTERS CODESTRL.BO31 December 2008Previous Recommendation: BuySterlite IndustriesBuyRs261Equity Shares (m) 708.552-Week Range 1,085/1651,6,12 Rel. Perf. (%) 4/-35/-22M.Cap. (Rs b) 184.7M.Cap. (US$ b) 3.8YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 243,768 45,985 82.3 37.1 3.2 1.5 64.0 45.2 0.7 2.53/08A 247,054 45,372 64.0 -22.2 4.1 0.8 28.5 21.2 0.4 1.73/09E 201,859 44,670 63.0 -1.5 4.1 0.8 22.2 13.0 0.3 1.43/10E 234,328 27,651 39.0 -38.1 6.7 0.7 13.0 7.0 0.2 1.7Consolidated? We expect net sales to decline 26% YoY to Rs38.7b due to fall in zinc prices on the LME and falling copper prices.Copper production too will suffer due to shut down of smelter on account of break-down of cooling tower.? EBITDA is expected to decline 33.6% YoY and the margin would contract 300bp to 27%.? Profit after tax is likely to decrease 1.4% YoY to Rs8.4b.? We have revised our FY09 and FY10 EPS estimates by 3.5% and 2.5% respectively. Our aluminium price assumptionis US$1,500/ton for 4QFY09 and US$1,600 for FY10. We have assumed a zinc price of US$1,200/ton for FY10. Thestock trades at 0.8x P/BV FY09E. Maintain Buy.QUARTERLY PERFORMANCE (CONSOLIDATED)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 61,391 65,671 52,332 67,659 57,701 65,938 38,684 39,537 247,054 201,859Change (YoY %) 33.4 -2.2 -23.2 8.2 -6.0 0.4 -26.1 -41.6 1.3 -18.3Total Expenditure 39,830 46,013 36,616 45,913 39,435 49,588 28,252 29,868 168,372 147,143EBITDA 21,561 19,658 15,717 21,746 18,266 16,350 10,432 9,669 78,682 54,717Change (YoY %) 16.6 -23.6 -43.1 -4.3 -15.3 -16.8 -33.6 -55.5 -67.7 -30.5As % of Net Sales 35.1 29.9 30.0 32.1 31.7 24.8 27.0 24.5 31.8 27.1Interest 955 643 681 908 874 581 598 616 3,186 2,668Depreciation 2,031 2,046 2,142 (269) 1,655 1,667 1,733 1,802 5,950 6,857Other Income 3,501 3,233 3,009 5,918 4,024 6,121 4,200 4,300 15,661 18,645PBT (before XO item) 22,076 20,202 15,904 27,024 19,761 20,224 12,301 11,550 85,206 63,836Extra-ordinary Exp. - - - (528) - (100) - - (528) (100)PBT (after XO item) 22,076 20,202 15,904 26,496 19,761 20,124 12,301 11,550 84,678 63,736Total Tax 5,247 4,465 4,138 7,177 3,808 2,916 1,722 1,617 21,027 10,062% Tax 23.8 22.1 26.0 27.1 19.3 14.5 14.0 14.0 24.8 15.8Reported PAT 16,829 15,737 11,766 19,319 15,953 17,208 10,579 9,933 63,651 53,674Minority Interest 5,400 4,911 3,213 6,135 4,443 4,439 2,146 1,490 19,659 12,517Adjusted PAT 11,429 10,826 8,553 13,569 11,510 12,855 8,433 8,444 44,389 44,670Change (YoY %) 28.7 -7.1 -33.9 18.2 0.7 18.7 -1.4 -37.8 -77.2 0.6E: MOSL EstimatesSanjay Jain (SanjayJain@MotilalOswal.com);Tel:+9122 39825412/Ashutosh Somani (Ashutosh.Somani@motilaloswal.com);Tel:+9122 3982542531 December 2008188

Results PreviewSECTOR: METALSSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGSAIL INREUTERS CODESAIL.BO31 December 2008Previous Recommendation: SellSteel Authority of IndiaSellRs77Equity Shares (m) 4,130.452-Week Range 289/551,6,12 Rel. Perf. (%) 10/-16/-20M.Cap. (Rs b) 319.9M.Cap. (US$ b) 6.6YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 346,339 62,775 15.2 53.7 5.1 1.8 36.2 41.9 0.8 2.83/08A 400,581 84,603 20.5 34.8 3.8 1.4 36.4 45.8 0.5 1.73/09E 461,514 55,420 13.4 -34.5 5.8 1.2 20.4 26.4 0.5 2.73/10E 429,059 48,612 11.8 -12.3 6.6 1.0 15.6 20.3 0.7 3.8Consolidated? We expect net sales to grow 5.4% YoY to Rs100b, driven by 26.9% growth in average realization, while the salesvolume is expected to decline 16.9% to 2.5m tons due to poor demand.? EBITDA margin will decline 27pp YoY to 5.5% due to higher cost of coking coal imports (US$300/ton). Depreciationof currency too has added to costs of imports.? PAT is likely to decline 80% YoY to Rs3.9b.? Topline growth of SAIL will be 13.8% in FY09 driven by higher realization. However, higher coking coal prices andemployee costs will pull down bottomline by 35% YoY. Maintain Sell.QUARTERLY PERFORMANCE (CONSOLIDATED)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales (m tons) 2.53 3.00 3.01 3.80 2.65 2.65 2.50 3.44 12.34 11.24Change (YoY %) 2.4 1.8 -0.1 10.1 4.7 -11.7 -16.9 -9.5 3.9 -8.9Realization (Rs per ton) 31,777 30,545 31,672 35,468 41,621 46,183 40,183 36,183 32,588 40,713Change (YoY %) 14.4 5.4 11.8 17.8 31.0 51.2 26.9 2.0 12.8 24.9Net Sales 80,395 91,635 95,333 134,779 110,294 122,386 100,458 124,471 402,142 457,609Change (%) 17.2 7.3 11.7 29.8 37.2 33.6 5.4 -7.6 17.2 13.8EBITDA 24,636 27,100 30,641 47,333 30,086 37,015 5,548 8,250 129,710 80,899Change (YoY %) 38.4 16.1 16.8 58.2 22.1 36.6 -81.9 -82.6 33.3 -37.6As % of Net Sales 30.6 29.6 32.1 35.1 27.3 30.2 5.5 6.6 32.3 17.7EBITDA per ton 9,738 9,033 10,180 12,456 11,353 13,968 2,219 2,398 10,511 7,197Interest 796 594 598 522 568 475 625 625 2,509 2,293Depreciation 3,012 3,012 3,160 3,171 3,165 3,194 3,425 3,425 12,355 13,209Other Income 3,069 3,043 3,143 3,774 3,926 4,224 4,505 5,216 13,029 17,871PBT (before EO Inc.) 23,897 26,537 30,027 47,414 30,278 37,570 6,003 9,416 127,875 83,267EO Income(exp) -807 -807 -807 -10,764 -2,350 -6,900 -13,186 -9,250PBT (after EO Inc.) 23,090 25,730 29,219 36,650 27,928 30,670 6,003 9,416 114,689 74,017Total Tax 7,839 8,726 9,873 12,883 9,577 10,574 2,035 3,192 39,320 25,377% Tax 33.9 33.9 33.8 35.2 34.3 34.5 33.9 33.9 34.3 34.3Reported PAT 15,251 17,004 19,347 23,768 18,352 20,096 3,968 6,224 75,369 48,640Adjusted PAT 15,704 17,439 19,732 31,159 19,897 24,689 3,945 6,187 84,035 54,718Change (YoY %) 54.7 22.5 23.6 63.6 26.7 41.6 -80.0 -80.1 41.5 -34.9E: MOSL EstimatesSanjay Jain (SanjayJain@MotilalOswal.com);Tel:+9122 39825412/Ashutosh Somani (Ashutosh.Somani@motilaloswal.com);Tel:+9122 3982542531 December 2008189

Results PreviewSECTOR: METALSSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGTATA INREUTERS CODETISC.BO31 December 2008Previous Recommendation: BuyTata SteelBuyRs217Equity Shares (m) 822.052-Week Range 952/1461,6,12 Rel. Perf. (%) 38/-42/-24M.Cap. (Rs b) 178.2M.Cap. (US$ b) 3.8YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 252,124 42,773 70.2 3.1 3.1 0.9 30.1 15.4 0.9 3.13/08A 1,315,359 77,404 94.2 34.1 2.3 1.1 48.4 15.1 0.5 3.63/09E 1,527,886 83,411 101.5 7.8 2.1 0.8 36.8 14.2 0.4 3.43/10E 1,533,702 69,930 85.1 -16.2 2.5 0.7 25.7 12.1 0.4 3.8Consolidated? We expect standalone net sales to increase 34.9% YoY to Rs67b, driven by 20% YoY growth in realizations and 28%YoY growth in volumes. EBITDA is expected to increase 37.8% YoY and margin would contract 440bp to 37.8%.? Indian operations will deliver strong volume growth of 27% in 2HFY09 and further 20% growth in FY10.? Corus has cut production by 30-35% during the quarter due to weakening of demand. Corus has taken number ofinitiatives to reduce costs. Raw material purchase has been stopped since the end of 2Q as its present inventories willlast longer due to production cuts. There will likely be gains on currency hedge due to absence of actual purchase ofraw material. Corus has a policy of hedging its net exposure to US$. We estimate EBITDA losses for Corus, whichmay be offset by gains on currency hedge. Captive iron ore and coking coal mines, strong volume growth, and loweroperating costs due to performance improvement will ensure strong cash flows even in difficult economic conditions.We estimate an EPS of Rs101.5 for FY09 and Rs85.1 for FY10 for the consolidated entity. The stock trades at anEV/EBITDA of 3.4x FY09E and 3.8x FY10E. We reiterate Buy.QUARTERLY PERFORMANCE (STANDALONE)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09EStandalone Financials 1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales ('000 tons) 1,041 1,218 1,244 1,279 1,159 1,220 1,594 1,679 4,782 5,700Change (YoY %) -6.6 2.9 0.7 1.5 11.4 0.1 28.1 31.3 -0.3 19.2Realization (Rs per ton) 36,665 35,280 35,201 39,157 45,737 48,286 42,286 38,286 36,598 43,555Change (YoY %) 17.8 11.4 9.2 11.4 24.7 36.9 20.1 -2.2 12.3 19.0Net Sales 41,976 47,851 49,739 57,367 61,650 67,442 67,096 66,484 196,933 262,671Change (YoY %) 7.2 14.3 11.3 15.2 46.9 40.9 34.9 15.9 12.2 33.4EBITDA 16,992 20,254 20,966 24,023 30,246 30,765 25,386 22,983 82,235 109,379(% of Net Sales) 40.5 42.3 42.2 41.9 49.1 45.6 37.8 34.6 41.8 41.6EBITDA(Rs/tss) 15,110 15,138 14,941 16,323 21,918 20,609 12,404 10,341 15,481 17,750Interest 800 2,022 3,627 2,339 2,417 2,548 2,676 2,809 8,787 10,451Depreciation 2,112 2,050 2,092 2,092 2,168 2,488 2,762 2,762 8,346 10,180Other Income 1,461 943 670 275 122 3,449 370 370 3,350 4,311PBT (after EO Inc.) 19,025 17,466 15,747 18,426 22,749 25,723 20,318 17,781 70,664 86,571Total Tax 6,804 5,558 5,061 6,371 7,865 7,845 6,827 5,975 23,793 28,511% Tax 35.8 31.8 32.1 34.6 34.6 30.5 33.6 33.6 33.7 32.9Reported PAT 12,221 11,908 10,686 12,055 14,884 17,878 13,491 11,807 46,870 58,060Adjusted PAT 9,983 11,676 10,802 12,999 17,918 21,332 13,491 11,807 44,659 64,549Change (YoY %) 3.4 3.1 -1.5 15.0 79.5 82.7 24.9 -9.2 2.1 44.5Consolidated FinancialsNet Sales 311,546 324,249 318,985 360,579 435,083 441,990 332,717 318,097 1,315,359 1,527,886EBITDA 49,043 47,227 39,428 52,255 69,876 82,497 18,658 18,038 179,931 189,069Adjusted PAT 19,316 14,542 12,520 20,729 42,043 51,679 -4,866 -5,445 62,255 83,411E: MOSL Estimates; tss=ton of steel sales; Exchange rate assumed GBP=1.98 USD, USD=40.4 INRSanjay Jain (SanjayJain@MotilalOswal.com);Tel:+9122 39825412/Ashutosh Somani (ashutosh.somani@motilaloswal.com);Tel:+9122 3982542531 December 2008190

Results PreviewQUARTER ENDING DECEMBER 2008Oil & GasBSE Sensex: 9,647 S&P CNX: 2,959 31 December 2008COMPANY NAMEBPCLCairn IndiaChennai PetroleumGAILHPCLIOCIndraprastha GasMRPLONGCReliance IndustriesSteep decline in oil prices; petchem operating rates under pressureYoY comparative (v/s 3QFY08)? Average 3QFY09 Brent price down 37% at ~US$56/bbl v/s US$89/bbl; Dubai crudedown 35% at US$54/bbl v/s US$83/bbl.? Benchmark Singapore complex average 3QFY09 refining margins down 53%:~US$3.6/bbl (v/s US$7.7/bbl in 3QFY08)? Spreads up; however operating rates have reducedPolymers: PE up 14%; PP up 22%;Polyester intermediates: PTA up 54%; and MEG down 51%;Integrated polyesters up: POY up 13% and PSF up 19%.QoQ comparative (v/s 2QFY09)? Average 3QFY09 Brent down 51% from US$116/bbl; Dubai down 52% from US$113/bbl.? Singapore complex margins down 38% from US$5.8/bbl in 2QFY09.? Polymer spreads down; polyester spreads up;Polymers: PE down 7%; PP down 15%;Polyester intermediates: PTA up 7%; MEG up 6%;Integrated polyesters: POY up 17% and PSF up 23%.Factors to watch? With significant decline in oil prices over 3QFY09, we expect refiners to report significantinventory losses. The key factor refiners would watch for is the quantum of inventorylosses in 3QFY09.? Subsidy sharing has remained ad hoc in 1HFY09 and there is no clarity on the sharingin 2HFY09. We have not considered any oil bonds in 3QFY09; any issuance of oilbonds for the quarter would impact our estimates. However, we have assumed issuanceof oil bonds in 4QFY09.EXPECTED QUARTERLY PERFORMANCE SUMMARYRECO SALES EBITDA NET PROFIT(RS MILLION)DEC.08 CHG. (%) DEC.08 CHG. (%) DEC.08 CHG. (%)Oil & GasBPCL Buy 236,514 -18.2 7,273 66.4 1,405 -24.6Cairn India Buy 2,140 -19.8 1,391 -3.3 1,341 LPChennai Petroleum Buy 57,347 -18.8 -641 PL -1,479 PLGAIL Buy 46,708 8.7 4,855 -44.3 3,425 -44.9HPCL Buy 230,108 -15.1 5,202 251.3 -26 -97.4Indraprastha Gas Neutral 2,195 20.1 852 9.2 490 8.9IOC Buy 497,807 -22.2 16,379 -44.8 6,960 -70.5MRPL Sell 53,485 -34.3 -282 PL -1,272 PLONGC Neutral 153,114 1.3 84,434 5.1 46,262 5.9Reliance Inds. Buy 397,156 14.8 55,934 -4.1 33,945 -12.6Sector Aggregate 1,676,574 -11.6 175,400 -9.9 91,052 -23.4Harshad Borawake (HarshadBorawake@MotilalOswal.com) Tel: 3982543231 December 2008191

Oil & GasOil slumped to ~US$31/bbl; demand slowdown continues3QFY09 highlights? Average 3QFY09 Brent price down 37% YoY at US$56/bbl (v/s US$89/bbl in 3QFY08)? Average 3QFY09 Brent down 51% QoQ (v/s US$116/bbl in 2QFY09)Crude price continued its downward slide in the quarter and had reached ~US$31/bblduring the quarter. Despite significant supply cuts from OPEC, oil price dropped, as thecurrent economic slowdown is weighing higher over the crude demand. OPEC hasannounced a total of 4.2mmbbl/d since September-2008.IEA in its latest forecast has estimated a contraction in oil demand in 2008 – this would bethe first time since 1983! Over the last one year, IEA has revised its oil demand forecast,for 2008 downward; eight times totaling 2mmbbl/d to its current forecast of 85.8mmbbl/d.It estimates that 2009 demand would grow marginally by 0.6% to 86.3mmbbl/d.With the significant decline in oil prices, future investments in the upstream sector arelikely to be delayed. Given the significant decline rates in non-OPEC oil fields, the lowerinvestments would put future oil price supply at risk. However, in the current scenario,economic slowdown is weighing higher over the crude demand and would dictate the oilprice.SHARP FALL IN OIL PRICES (US$/BBL)150120113139WTI Brent Dubai97WTI had reachedUS$31.4/bbl in 3QFY09906042301-Apr-0816-Apr-081-May-0816-May-0831-May-0815-Jun-0830-Jun-0815-Jul-0830-Jul-0814-Aug-0829-Aug-0813-Sep-0828-Sep-0813-Oct-0828-Oct-0812-Nov-0827-Nov-0812-Dec-0827-Dec-08Source: Bloomberg/ MOSLCrude oil differentials down YoYArab light-heavy differential at US$4.7/bbl was down 8% YoY and the WTI-Mayadifferential at US$13.4/bbl was down 11% YoY. On a QoQ basis though, there was amixed trend with Arab light-heavy down 45% and WTI-Maya up 17%. One of the keyreasons for Lowe spreads could be the lower gasoline demand/cracks is putting pressureon the light crude oil demand.31 December 2008192

Oil & GasRefining margins near 5 year lows and extremely volatile3QFY09 highlights? Benchmark Singapore complex refining margins at US$3.6/bbl were down 53% YoY(v/s US$7.7/bbl in 3QFY08)? QoQ down 38% (v/s US$5.8/bbl in 2QFY09)SINGAPORE REFINING MARGINS ARE DOWN QOQ AND YOY (US$/BBL)1299.4MonthlyQuarterly10.110.6 3QFY088.46303.74.55.53QFY091.4Apr-03Jul-03Oct-03Jan-04Apr-04Jul-04Oct-04Jan-05Apr-05Jul-05Oct-05Jan-06Apr-06Jul-06Oct-06Jan-07Apr-07Jul-07Oct-07Jan-08Apr-08Jul-08Oct-08Source: Industry/ MOSLSingapore refining margins averaged ~US$3.6/bbl in 3QFY09 (down 53% YoY and down38% YoY). Such low margins have been witnessed for first time since September 2003.Singapore refining margin were volatile during the quarter with October average of US$6.3/bbl, November avg of US$1.4/bbl and December avg of US$3/bbl. After the bounce backin September, led by hurricane-driven preventive shutdowns in the US, the GRMs were ona continual slide till mid december. Decline in the GRM was led by Gasoline and Naphtha,however Diesel and Jet/Kero cracks continue to remain strong providing some support.During the last 5 days of 3QFY09, Singapore GRM have increased significantly, with anaverage of US$6.5/bbl led by some recovery in Gasoline, Naphtha and LPG cracks.However, improvement in the GRM in the last 5 days is not likely to sustain as there seemsto be no change in the fundamentals of the sector in terms of demand outlook / newrefinery starts. We expect GRMs to remain low in the short term as new capacities of~1.2- 1.5mmbbl/d (including RPL) is commissioned over next few months.LOWER GASOLINE AND NAPHTHA CRACKS DURING THE QUARTER (US$/BBL)6035Gasoline Diesel Jet/Kero Fuel oil NaphthaJet/Kero and Diesel crackscontinue to remain strong10-15-40Naptha/Gasoline cracks improvedmarginally towards end of 3QFY09Dec-07Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-0831 December 2008*Singapore Product pricesSource: Bloomberg/ MOSL193

Oil & GasRMC’s: Is deregulation on the cards? FY10 looks promising for RMCsDespite recent price cuts RMCs make profits in petrol and diesel: Recently,government cut prices of petrol by Rs5/liter and that of diesel by Rs2/liter. However, thelower oil price is helping Refining and Marketing companies (RMCs) make profit to thetune of Rs9/liter from petrol and Rs2.5/liter from diesel. Even at an oil price of US$60/bbl,and downstream share in underrecoveries at 22% in FY10, RMCs profit would be significantat current fuel prices.Is deregulation on the cards? The government, in April 2002, had dismantled theadministered pricing mechanism (APM), and had allowed RMCs to price petrol and dieselfreely for some time. Crude oil price in April-2002 was US$26/bbl. However, due to sharpincrease in the crude prices, the government later advised RMCs to control the prices ofpetrol, diesel, PDS kerosene and domestic LPG, leading to underrecoveries. Now thesignificant fall in the crude oil prices, has given the right opportunity to the government todecontrol these products again. While, we are not building this scenario in our estimates ifthe government was to decontrol RMC’s, this could lead to rerating of RMC’s.FY09 underrecovery estimated at Rs951b: We estimate FY09 underrecoveries toincrease by 23% to Rs950b v/s Rs773b in FY08. We assume an average oil price ofUS$50/bbl in 4QFY09 and build in no fuel price cuts. If current trend of oil price sustain(US$42/bbl in 4QFY09), then our 4QFY09 estimates will be achieved even if there is apetrol price cut of Rs8/ltr and diesel price cut of Rs2/ltr.FY09 UNDER RECOVERY TO BE JUST 40% OF THE INITIAL ESTIMATE OF RS240B IN JUNE 2008FY07 FY08 1HFY09A 2HFY09E FY09E FY10EExchange Rate (Rs/US$) 45.2 40.3 42.7 48.8 45.6 45.6Brent Oil Price (US$/bbl) 64.4 82.3 119.0 53.5 86.3 60.0Per Unit (Under)/Over Recoveries (Rs b)Petrol (Rs/ltr) -1.6 -5.2 -10.8 7.7 -1.5 5.4Diesel (Rs/ltr) -3.9 -6.2 -18.6 1.4 -8.6 -0.5SKO (Rs/ltr) -15.7 -16.7 -30.2 -15.2 -22.7 -17.8LPG (Rs/Cyl) -169.0 -219.9 -305.6 -114.6 -210.1 -181.8Fuel Under/(Over) Recoveries (Rs b)Petrol 20 73 85 -61 24 -39Diesel 188 353 559 -43 516 33SKO 179 191 175 89 264 187LPG 107 156 110 37 147 93Total Under/(Over) Recoveries (Rs b) 494 773 929 22 951 274Source: PPAC/Industry/MOSLSubsidy sharing remains ad hoc: Subsidy sharing has remained ad-hoc historically andthus the profitability of RMCs continue to be impacted more by subsidy sharing than bybusiness fundamentals. Though, at current oil prices RMCs are making profits via marketing,we estimate that they would require further assistance in terms of oil bonds/upstreamdiscount so that all the RMCs would be in black. We assume oil bonds of Rs133b in4QFY09 (HPCL – Rs28b, BPCL – Rs29b and IOC – Rs70b).31 December 2008194

Oil & GasIn 1HFY09 of the total underrecovery of Rs929b, RMC’s accounted for oil bonds ofRs450b, upstream sharing of Rs259b and the rest Rs220b was borne by RMC’s. However,the subsidy sharing for 2HFY09 is yet unknown. We have assumed Rs133b of oil bonds in2HFY09. However, the actual oil bonds issuance, if any, could be significantly differentfrom our estimates.SUBSIDY SHARINGFY07 FY08 1HFY09A 2HFY09E FY09E FY10ESharing of Under Recoveries (Rs b)Oil Bonds 241 353 450 133 582 123Upstream 205 257 259 58 317 91OMC’s sharing 48 163 220 -169 52 59Total 494 773 929 22 951 274Sharing (%)Oil Bonds 48.8 45.6 48.4 nm 61.2 45.0Upstream 41.6 33.3 27.9 nm 33.3 33.3OMC’s sharing 9.6 21.1 23.7 nm 5.4 21.7Total 100.0 100.0 100.0 100.0 100.0 100.0Source: PPAC/Industry/MOSLPetrochemical: Lower operating ratesKey polymer prices were down QoQ and YoY, primarily due to reduced feedstock pricesand demand slowdown. The price of Naphtha declined 60% QoQ and 46% YoY in rupeeterms. Key polymer prices were down 32-36% QoQ and 10-13% YoY, while polyesterprices were down 16-17% QoQ and 6-8% YoY.KEY PRODUCT SPREADS (RS/KG)3QFY09 2QFY09 QOQ CH (%) 3QFY08 YOY CH (%)PE 41.4 44.7 -7.4 36.2 14.4PP 42.1 49.7 -15.2 34.4 22.2PTA 26.7 25.0 6.5 17.3 53.7MEG 21.4 20.3 5.6 43.4 -50.7POY Integrated 51.3 43.9 16.8 45.4 13.0PSF Integrated 48.5 39.6 22.6 40.9 18.6*PE,PP,PTA and MEG spreads over naphtha, POY & PSF spreads over PTA-MEG adjusted forconsumption normsSource: Industry/ MOSLPrices of petrochemicals have reduced drastically in the last few weeks led by fall infeedstock prices and demand contraction. Operating rates have also reduced for petchemproducers in the last few months due to lack of demand, particularly in China.Change in Petchem scenario in last 2-3 quarters:? March to July 2008: Very high prices led to demand slowdown? August-October 2008: Declining prices resulted in destocking by converters in thehope of further price reduction. Inventory levels with polymer producers increased.? November-December 2008: Very low prices, however demand contraction led byeconomic slowdown and credit crunch. This has forced polymer producers to cutoperating rates. Many players had to offload their inventories at steep discounts.31 December 2008195

Oil & GasIn the last few months, downstream converters had reduced their inventories (de-stocking)as polymer prices continued to fall. Fear of global economic slowdown; new gas-basedcapacity additions in the Middle-East would impact petrochemical chain margins in ourview.RELATIVE PRICES: NAPHTHA OVER POLYMERS (RS/KG) RELATIVE PRICES: NAPHTHA OVER POLYESTER CHAIN(RS/KG)340PE PP Naphtha330POY PSF PTAMEGNaphtha27026020019013012060Dec-03Apr-04Aug-04Dec-04Apr-05Aug-05Dec-05Apr-06Aug-06Dec-06Apr-07Aug-07Dec-07Apr-08Aug-08Dec-0850Dec-03Apr-04Aug-04Dec-04Apr-05Aug-05Dec-05Apr-06Aug-06Dec-06Apr-07Aug-07Dec-07Apr-08Aug-08Dec-08Source: Industry/ MOSLValuation and viewRefining and petchem outlook weak: We model Singapore refining margin of US$3/bbl in 4QFY09 and US$4/bbl in FY10. Our assumption of weak refining margin is basedon 1) product demand slowdown led by weak economic fundamentals and 2) large capacitiesscheduled to start over the next few quarters (1.2-1.5mmbbl/d) leading to additional productsupply in the market. In petrochemicals due to demand slowdown, producers are loweringtheir operating rates and in turn affecting profitability.Lower oil prices to benefit RMCs: Significant decline in the crude prices and recentissue of oil bonds will ease the liquidity position of OMCs significantly. We expect the debtlevels of the RMCs to reduce significantly in 4QFY09. Even at an oil price of US$60/bbland downstream share in underrecoveries at 22% in FY10, RMCs earnings would besignificantly positive at current product prices.RMCs are implementing several upgradation projects for their capacity, which will enablethem to: 1. Produce higher share of middle distillates, 2. Produce Euro-III/IV compliantfuels and 3. Process a larger share of sour/heavy crudes. Completion of these projects, intime and within schedule, will be margin accretive effective FY11.We upgrade RMC’s to Buy as 1) crude price decline coupled with fixed selling price forpetrol, diesel augurs well for these companies; 2) liquidity position is set to improve in4QFY09 leading to lower gearing; 3) expected positive contribution from marketing segmentand 4) attractive valuations. Also, likely deregulation of petrol and diesel prices will bepositive for the companies.31 December 2008196

Oil & GasAs gas production from KG-D6 reaches initial peak levels of 80mmscmd by end-FY09/early-FY10, RIL would become the largest gas producer in India and E&P would becomethe key contributor to its bottomline. For FY10, we factor in average KG-D6 gas productionvolume of 48mmscmd and model gas price of US$4.3/mmbtu in our estimates. Apart fromits core business, we believe that the stock performance would continue to be influencedby newsflow/updates with respect to its E&P business. We continue to remain positive onRIL, primarily due to large potential upsides from E&P.Though GAIL’s profitability in LPG and petchem division would be impacted by decline inthe petchem and LPG prices, profit from its transmission segment would help to partiallynegate such impact. We believe a significant portion of RIL’s new gas will flow throughGAIL’s network as a majority of priority consumers (as per the Gas Utilization Policy)such as fertilizer, LPG, power and CGD, are linked to GAIL’s pipelines. We maintain Buyon RIL and GAIL.Though lower oil prices have reduced underrecovery, non-transparency in the subsidysharing remains a concern for ONGC. The company recently announced the acceptanceof its acquisition offer by 96.8% of the Imperial Energy Corporation Plc (IEC) shareholders.Acquisition price of 1,250 pence /share implies the value for IEC’s 2P reserves at ~US$2.8/boe and for its 1P reserves at ~US$14.6/boe. Acquisition benefits for ONGC are expectedto come over medium to long term as the production from Imperial Energy’s blocks rampsup to 80kbd by end-2011. We believe ONGC’s stock performance in the short term wouldbe dictated by crude price and subsidy sharing for 2HFY09. Maintain Neutral.We also remain positive on Cairn on two counts: (1) its Rajasthan development project ison track for 2HFY09 production commencement; and (2) its planned 5-6 well drillingprogram in next few months could provide positive newsflow in terms of new discoveries.The current stock price of Rs172 discounts US$50-52/bbl of long term crude price in ourestimate. We model long term Brent oil price of US$65/bbl in our estimates. We maintainBuy on Cairn.31 December 2008197

Oil & GasStock performance and valuationsSTOCK PERFORMANCE (%)ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEAROil & GasBPCL 4 -28 29 24 32 20Cairn India -19 -33 6 19 9 15Chennai Petroleum -40 -70 -15 -18 -12 -22GAIL -24 -43 1 9 3 6HPCL 13 -26 38 26 40 23Indraprastha Gas -12 -41 13 11 16 8IOC 5 -46 30 6 33 2MRPL -23 -70 2 -17 5 -21ONGC -36 -46 -11 6 -8 3Reliance -37 -57 -12 -5 -9 -9RELATIVE PERFORMACE - 3 MONTHS (%) RELATIVE PERFORMANCE - 1 YEAR (%)105SensexMOSL Oil & Gas Index102MOSL Oil & Gas IndexSensex95878572755765Sep-08 Oct-08 Nov-08 Dec-0842Dec-07 Mar-08 Jun-08 Sep-08 Dec-08COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EOil & GasBPCL 376 Buy 48.9 58.8 59.0 7.7 6.4 6.4 8.1 8.5 6.2 15.9 15.9 14.5Cairn India 172 Buy -0.1 3.0 3.8 - 57.4 45.8 48.0 37.3 16.8 -0.1 1.8 2.2Chennai Petroleum 128 Buy 73.1 52.8 28.7 1.8 2.4 4.5 2.3 3.2 4.0 37.2 14.6 11.2GAIL 206 Buy 20.1 21.2 21.2 10.3 9.7 9.7 5.8 6.4 6.5 20.0 18.3 16.9HPCL 273 Buy 33.5 5.8 27.2 8.1 47.3 10.0 17.3 14.5 7.6 11.3 1.9 8.6Indraprastha Gas 102 Neutral 12.5 13.3 10.7 8.2 7.7 9.5 4.3 3.8 4.2 33.4 29.2 20.4IOC 426 Buy 66.4 69.9 62.7 6.4 6.1 6.8 7.2 9.1 7.2 19.7 17.9 14.1MRPL 41 Sell 6.7 6.5 3.0 6.1 6.3 13.5 4.3 4.7 9.6 38.9 26.6 11.1ONGC 668 Neutral 92.9 106.5 97.6 7.2 6.3 6.8 2.8 2.4 2.5 27.7 27.1 21.5Reliance Inds. 1,230 Buy 105.0 95.7 140.2 11.7 12.9 8.8 9.7 9.0 6.6 21.5 16.1 18.3Sector Aggregate 9.4 9.0 8.2 6.2 5.8 5.2 19.1 17.0 15.9UR = Under Review31 December 2008198

Results PreviewSECTOR: OIL & GASSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGBPCL INREUTERS CODEBPCL.BO31 December 2008Previous Recommendation: NeutralBPCLBuyRs376Equity Shares (m) 361.552-Week Range (Rs) 560/2061,6,12 Rel. Perf. (%) 0/91/24M.Cap. (Rs b) 135.9M.Cap. (US$ b) 2.8YEAR NET SALES ADJ. PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END * (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 982 21.1 58.4 292.9 6.4 1.2 19.8 13.7 0.3 5.803/08A 1,112 15.1 41.9 -28.3 9.0 1.1 12.5 8.5 0.3 8.103/09E 1,255 12.1 33.5 -20.0 11.2 1.0 9.4 5.7 0.2 9.803/10E 956 17.8 49.2 46.8 7.6 0.9 13.1 10.2 0.3 5.7* Consolidated? We estimate BPCL to report net profit of Rs1.4b v/s adj. PAT of Rs1.9b in 3QFY09.? Significant oil price decline during the quarter from US$95/bbl to ~US$40/bbl would lead to significant inventorylosses, impacting reported refining margins. Contribution from marketing division has reversed from loss to profittowards the end of the quarter.? However, we estimate that majority of the OMCs would require oil bonds in 2HFY09 to end the year in black. Weassume oil bonds of Rs29b to be issued in 4QFY09 in our base case.? We model discounts from upstream at Rs6.3b (v/s Rs16.2b in 3QFY08). We do not factor in any oil bonds in3QFY09.? On the operational front, we expect throughput at 5.4mmt (up 2% QoQ and 3% YoY).? Despite significant decline in working capital led by oil price decline; we expect interest cost to remain high in3QFY09 as BPCL: (1) turned cash flow positive towards the end of the quarter; and (2) is yet to receive Rs51b oilbonds. We estimate debt to reduce to Rs140b by end-FY09 v/s current level of ~Rs240b. P/B? The stock trades at 7.6x FY10E consolidated EPS of Rs49.2 and 0.9x FY10 P/B. Upgrade to Buy.QUARTERLY PERFORMANCE (STANDALONE)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 238,694 251,704 289,284 325,420 390,220 378,262 236,514 240,925 1,105,102 1,245,921Change (%) 5.1 -5.1 19.5 34.9 63.5 50.3 -18.2 -26.0 13.3 12.7Raw Material Consumed 111,518 113,211 137,007 132,175 145,081 168,403 119,348 102,971 493,911 535,804Staff Cost 2,800 2,825 2,798 4,550 6,707 3,115 3,177 3,218 12,973 16,216Fininshed Goods Purchase 113,551 107,840 137,893 166,231 223,357 206,885 102,545 86,721 525,515 619,507Other Exp (incl Stock Adj) 8,765 12,179 7,215 13,864 22,768 21,534 4,170 4,500 42,023 52,972EBITDA 2,060 15,649 4,371 8,600 -7,693 -21,674 7,273 43,515 30,680 21,421Change (%) nm -8.7 -36.6 -32.5 nm nm 66.4 406.0 -10.2 -30.2% of Sales 0.9 6.2 1.5 2.6 -2.0 -5.7 3.1 18.1 2.8 1.7Depreciation 2,276 2,322 3,065 3,319 2,691 2,419 2,550 2,658 10,982 10,318Interest 1,240 1,228 1,620 2,156 3,016 5,338 5,119 3,550 6,244 17,023Other Income 4,341 3,652 3,183 1,343 2,757 3,225 1,800 1,718 12,519 9,500PBT 2,885 15,751 2,869 4,468 -10,643 -26,207 1,405 39,025 25,973 3,580Tax 958 5,369 -44 3,884 24 46 0 1,951 10,167 2,021Rate (%) 33.2 34.1 -1.5 86.9 -0.2 -0.2 0.0 5.0 39.1 56.5PAT 1,927 10,382 2,913 584 -10,667 -26,253 1,405 37,074 15,806 1,558Change (%) nm -17.5 -4.0 -91.3 nm nm -51.8 6,248.2 -12.5 -90.1Adj. PAT 12 9,824 1,863 867 -7,843 -21,539 1,405 37,074 12,565 9,096E: MOSL Estimates; * Adjusted for forex gain/lossHarshad Borawake (HarshadBorawake@MotilalOswal.com) Tel: 3982543231 December 2008199

Results PreviewSECTOR: OIL & GASSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGCAIR INREUTERS CODECAIL.BO31 December 2008Previous Recommendation: BuyCairn IndiaBuyRs172Equity Shares (m) 1,894.452-Week Range 343/881,6,12 Rel. Perf. (%) 15/-9/19M.Cap. (Rs b) 325.8M.Cap. (US$ b) 6.7YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA12/07A 10,123 -245 -0.1 - 1.0 -0.1 1.1 29.7 45.112/08E 12,768 7,100 3.7 N.M. 45.9 1.0 2.3 2.3 25.8 36.212/09E 25,600 7,119 3.8 0.3 45.8 1.0 2.2 3.1 13.6 16.712/10E 79,156 46,075 24.3 547.2 7.1 0.9 13.4 15.0 4.1 4.6*EPS based on diluted equity; Consolidated? We expect Cairn to report net sales at Rs2.1b (v/s Rs2.7b in 4QCY07) primarily due to lower oil prices. We estimatePAT at Rs1.3b v/s loss of Rs139m in 4QCY07.? Cairn’s exploration costs during the quarter are expected to be high as it currently undertaking drilling program of5-6 wells in Rajasthan and Bihar.? We estimate gross oil and gas production at 64kboepd v/s 65kboepd in 3QCY07 and 66kboepd in 3QCY08. Networking interest production for Cairn is estimated at 16.6kboepd (up 2% YoY and down 3% QoQ).? Average realization for the quarter is estimated at US$49/boe (v/s US$68/bbl in 4QCY07 and US$87.3/boe in3QCY08).? We estimate Cairn to report forex gain of Rs1b on its forex reserve balance from IPO proceeds.? We build first production from its Rajasthan Block to commence from July 2009 in our estimates. Also, its planned 5-6 well drilling program in next few months could provide positive newsflow in terms of new discoveries.? The stock currently trades at 7.1x CY10E earnings. We maintain Buy.QUARTERLY PERFORMANCE (CONSOLIDATED)31 December 2008(RS MILLION)Y/E DECEMBER CY07 CY08 CY07 CY08E1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QENet Sales 2,364 2,433 2,658 2,667 3,158 4,036 3,206 2,140 10,123 12,540Change (%) 33.6 65.9 20.6 -19.8 23.9Inc/Dec in Stock 95 -157 0 -51 -33 180 -56 0 -112 92Staff Cost 309 288 238 423 252 292 160 168 1,257 871Operating Expenses 488 407 555 856 659 843 620 581 2,305 2,703EBITDA 1,472 1,895 1,865 1,439 2,280 2,721 2,483 1,391 6,672 8,874Change (%) 54.9 43.6 33.1 -3.3 33.0Exploration Write-off 474 741 720 577 175 428 79 846 2,512 1,527Depr. & Exploration w/off 528 404 512 633 632 647 650 667 2,077 2,596Interest 2 8 1 17 3 29 5 34 27 71Other Income (Net) 362 351 343 268 218 324 1,182 700 1,324 2,424Forex Fluctuations -138 -1,406 -300 -276 -19 254 873 1,024 -2,120 2,132Exceptional Items 156 -204 -48PBT 692 -312 674 205 1,824 2,196 3,600 1,569 1,259 9,188Tax 317 402 442 344 659 810 667 227 1,505 2,364Rate* (%) 38.2 36.8 45.3 71.6 35.8 41.7 24.5 41.7 44.5 25.7PAT 376 -714 232 -139 1,164 1,385 2,933 1,341 -245 6,824Adj. PAT 376 -714 232 -139 1,009 1,385 3,137 1,341 -245 6,872YoY Change (%) 168.5 NM 1,249.8 NM 581.4E: MOSL Estimates; * Excluding forex fluctuationsHarshad Borawake (HarshadBorawake@MotilalOswal.com) Tel: 39825432200

Results PreviewSECTOR: OIL & GASChennai Petroleum CorporationSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGMRL INREUTERS CODECHPC.BO31 December 2008Previous Recommendation: BuyBuyRs128Equity Shares (m) 149.052-Week Range 444/1011,6,12 Rel. Perf. (%) 16/-24/-18M.Cap. (Rs b) 19.1M.Cap. (US$ b) 0.4YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 246,533 5,653 37.9 16.1 3.4 0.7 23.0 20.1 0.2 3.503/08A 280,186 10,891 73.1 92.7 1.8 0.6 37.2 33.3 0.2 2.303/09E 326,747 7,855 52.7 -27.9 2.4 0.5 14.6 17.3 0.1 3.103/10E 247,003 4,277 28.7 -45.5 4.5 0.5 11.2 14.8 0.2 4.0? We expect CPCL to report losses of Rs1.5b (v/s adj. PAT of Rs2b in 3QFY08 and Rs264m in 2QFY09.? Significant oil price decline during the quarter from US$95/bbl to ~US$40/bbl would lead to significant inventorylosses, impacting reported refining margins.? On the operational front, we expect refinery throughput at 2.6mmt (v/s 2.3mmt in 3QFY08 and 2QFY09).? We expect refining margin to remain subdued in the short term as 1.2-1.6mmbbls new refining capacity is expectedto come on line in the next few months. The stock trades at 2.4x FY09E EPS and an EV of 3.1x FY09E EBITDA.We maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 62,217 63,365 70,609 83,995 112,532 102,833 57,347 54,035 280,186 326,747Change (%) -3.8 -4.8 20.0 48.6 80.9 62.3 -18.8 -35.7 13.7 16.6Raw Materials (incl Stock Adj) 55,767 57,210 64,873 75,335 95,838 99,794 56,437 50,174 253,186 302,243Employee Costs 303 384 290 450 857 568 380 403 1,427 2,207Other Exp 233 1,483 1,335 1,405 4,148 3,006 1,171 1,230 4,456 9,554EBITDA 5,914 4,288 4,112 6,804 11,689 -534 -641 2,228 21,118 12,742% of Sales 9.5 6.8 5.8 8.1 10.4 -0.5 -1.1 4.1 7.5 3.9Change (%) 23.5 80.1 237.5 69.3 97.6 -112.5 -115.6 -67.3 70.2 -39.7Depreciation 637 616 603 660 639 637 649 609 2,516 2,534Interest 460 561 409 518 380 607 631 639 1,948 2,256Other Income 83 386 421 -327 101 158 165 126 562 550PBT 4,900 3,497 3,521 5,299 10,771 -1,619 -1,756 1,106 17,216 8,502Tax 1,668 1,194 1,264 1,860 3,739 -592 -277 376 5,987 3,245Rate (%) 34.0 34.2 35.9 35.1 34.7 nm nm 34.0 34.8 38.2PAT 3,232 2,303 2,256 3,439 7,033 -1,027 -1,479 730 11,230 5,257Change (%) 26.9 136.8 826.6 81.9 117.6 nm nm -78.8 98.7 -53.2Adj PAT* 2,748 2,125 2,037 3,743 8,340 264 -1,479 730 10,653 7,855E: MOSL Estimates; * Adjusted for forex gain/lossHarshad Borawake (HarshadBorawake@MotilalOswal.com) Tel: 3982543231 December 2008201

Results PreviewSECTOR: OIL & GASSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGGAIL INREUTERS CODEGAIL.BO31 December 2008Previous Recommendation: BuyGAIL (India)BuyRs206Equity Shares (m) 1,268.552-Week Range 370/1651,6,12 Rel. Perf. (%) -1/21/9M.Cap. (Rs b) 261.3M.Cap. (US$ b) 5.4YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 160,472 20,468 16.1 -11.4 12.8 2.3 20.9 21.1 1.5 8.303/08A 180,082 25,442 20.1 24.3 10.3 2.0 20.0 25.2 1.3 5.803/09E 205,927 26,913 21.2 5.8 9.7 1.8 18.3 23.5 1.2 6.403/10E 243,954 26,849 21.2 -0.2 9.7 1.6 16.9 21.9 1.1 6.5? We expect GAIL to report PAT of Rs3.4b (down 45% YoY and 67% QoQ). Significant decline is primarily due tolower petchem margins; LPG prices and subsidy sharing for the previous quarter.? Significant decline in the petchem prices and LPG prices (~50% decline in both) will mar profitability in the quarter.Also, in 2QFY09, GAIL had underprovided subsidy to the tune of Rs2.6b, which we have accounted in the currentquarter.? We estimate gas transmission volumes at 85mmscmd (flat YoY and up 4% QoQ). 2QFY09 volumes were lower dueto shutdown at PMT (~3-4mmscmd lower supply) for about one month.? We have built GAIL’s subsidy share at Rs3.9b, which includes Rs2.6b for the previous quarter. GAIL’s subsidy sharewas Rs4b (provisional) in 2QFY09 and Rs3.7b in 3QFY08. Without the previous quarter’s subsidy of Rs2.6b, GAIL’sPAT would have been Rs5.2b. (down 16% YoY and down 49% YoY).? The stock trades at 9.7x FY09E EPS of Rs21.2. We maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 42,457 45,289 42,983 49,353 57,307 61,293 46,708 40,619 180,082 205,927Change (%) 4.1 22.2 -1.8 27.1 35.0 35.3 8.7 -17.7 12.2 14.4Finished Gds Purchase 23,529 25,398 24,190 28,890 33,281 36,224 26,624 23,965 102,007 120,093Raw Materials Cons 4,314 4,503 4,725 3,607 4,962 5,511 5,138 4,874 17,148 20,486Employee Costs 688 824 985 2,203 866 1,180 1,357 1,766 4,700 5,170Other Exp (incl Stock Adj) 3,540 5,782 4,360 3,053 4,204 4,063 8,734 3,830 16,735 20,831EBITDA 10,387 8,783 8,723 11,600 13,995 14,314 4,855 6,183 39,492 39,347% of Net Sales 24.5 19.4 20.3 23.5 24.4 23.4 10.4 15.2 21.9 19.1Change (%) 10.3 49.1 0.9 92.6 34.7 63.0 -44.3 -46.7 31.8 -0.4Depreciation 1,407 1,492 1,387 1,425 1,430 1,386 1,427 1,519 5,710 5,762Interest 204 201 196 195 190 189 198 230 796 808Other Income 913 1,806 1,848 997 1,148 2,289 1,800 1,163 5,564 6,400PBT 9,689 8,897 8,988 10,976 13,522 15,029 5,030 5,596 38,550 39,177Tax 2,837 3,171 2,775 3,752 4,554 4,794 1,604 1,785 12,535 12,737Rate (%) 29.3 35.6 30.9 34.2 33.7 31.9 31.9 31.9 32.5 32.5PAT 6,852 5,725 6,213 7,224 8,969 10,234 3,425 3,811 26,015 26,439Change (%) 15.7 27.7 -6.6 112.0 30.9 78.8 -44.9 -47.2 27.1 1.6Adj PAT 6,852 5,725 6,213 6,651 9,442 10,234 3,425 3,811 25,442 26,913E: MOSL Estimates; Adjusted for subsidy in 1QFY09 and 4QFY08Harshad Borawake (HarshadBorawake@MotilalOswal.com) Tel: 3982543231 December 2008202

Results PreviewSECTOR: OIL & GASHPCLSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGHPCL INREUTERS CODEHPCL.BO31 December 2008Previous Recommendation: NeutralBuyRs273Equity Shares (m) 339.052-Week Range 406/1641,6,12 Rel. Perf. (%) 9/84/26M.Cap. (Rs b) 92.4M.Cap. (US$ b) 1.9YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 890,413 14,402 42.5 255.1 6.4 1.0 15.7 12.4 0.2 8.803/08A 1,047,038 4,062 12.0 -71.8 22.8 0.9 4.0 7.6 0.3 17.303/09E 1,167,284 1,207 3.6 -70.3 76.6 0.9 1.2 5.5 0.2 14.103/10E 913,721 13,382 39.5 1,008.6 6.9 0.8 12.3 11.4 0.2 6.9? We estimate HPCL to report net loss of Rs26m (v/s adj. loss of Rs989m in 3QFY08 and net loss of Rs30.6b in2QFY09).? Significant oil price decline during the quarter from US$95/bbl to ~US$40/bbl would lead to significant inventorylosses, impacting reported refining margins. Contribution from the marketing division has reversed from loss to profittowards the end of the quarter.? Discounts from upstream are estimated at Rs5.8b (v/s Rs14.8b in 3QFY08) in our model. We do not factor in any oilbonds in 3QFY09. In our estimate, for FY09, majority of the OMCs would require oil bonds in 2HFY09 to end theyear in black. Hence in our base case, we assume oil bonds of Rs28b to be issued in 4QFY09.? On the operational front, we expect throughput at 4.3mmt (up 2% QoQ and down 1% YoY).? Despite significant decline in working capital led by oil price decline, we expect interest cost to remain high in3QFY09 as 1) HPCL turned cash flow positive towards the end of the quarter and 2) is yet to receive Rs20b oilbonds. We estimate debt to reduce to Rs140b by end-FY09 v/s current level of ~Rs240b.? The stock trades at 6.9x FY10E PS of Rs39.5 and 0.8x FY10P/B. Upgrade to Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 218,817 242,344 271,170 314,706 346,920 354,622 230,108 235,633 1,047,038 1,167,284Change (%) 5.8 -0.5 22.4 44.0 58.5 46.3 -15.1 -25.1 17.6 11.5Raw Material Consumed 81,914 64,049 107,231 103,493 87,637 144,411 89,816 76,356 356,688 398,220Staff Cost 1,805 2,067 2,174 2,631 3,819 3,442 3,098 3,101 8,677 13,460Fininshed Goods Purchase 128,882 150,771 150,430 191,977 246,629 216,979 127,991 109,612 622,059 701,211Other Exp 7,502 12,282 9,854 14,436 12,945 15,826 4,000 4,000 44,074 36,771EBITDA -1,285 13,176 1,481 2,169 -4,110 -26,036 5,202 42,564 15,540 17,621% of Net Sales -0.6 5.4 0.5 0.7 -1.2 -7.3 2.3 18.1 1.5 1.5Change (%) -75.1 -20.0 -23.7 -78.8 nm nm nm 1,862.6 -33.8 13.4Depreciation 1,798 2,017 2,161 2,532 2,367 2,420 2,495 2,588 8,508 9,869Interest 1,334 1,399 2,184 3,009 4,064 5,269 4,600 2,975 7,925 16,908Other Income 3,351 2,808 2,645 3,177 1,679 1,577 1,866 2,206 11,980 7,328PBT -1,066 12,568 -219 -196 -8,861 -32,149 -26 39,207 11,087 -1,829Tax -197 4,037 946 -963 20 40 0 0 3,824 60Rate (%) 18.5 32.1 -432.9 491.7 -0.2 -0.1 0.0 0.0 34.5 nmPAT -869 8,530 -1,165 767 -8,881 -32,189 -26 39,207 7,263 -1,889Change (%) nm -30.2 nm nm nm nm nm 5,011.7 -42.7 nmAdj. PAT -1,998 7,916 -989 -868 -7,403 -30,572 -26 39,207 4,062 1,207E: MOSL Estimates; Adj. PAT for forex and MATHarshad Borawake (HarshadBorawake@MotilalOswal.com) Tel: 3982543231 December 2008203

Results PreviewSECTOR: OIL & GASIndian Oil CorporationSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGIOC INREUTERS CODEIOC.BO31 December 2008Previous Recommendation: NeutralBuyRs426Equity Shares (m) 1,192.452-Week Range (Rs) 810/2991,6,12 Rel. Perf. (%) -2/57/6M.Cap. (Rs b) 508.2M.Cap. (US$ b) 10.5YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS B) (RS B) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 1,999 59.9 50.2 31.3 8.5 1.4 17.8 16.2 0.4 7.103/08A 2,279 70.0 58.7 16.9 7.3 1.2 17.5 17.4 0.4 7.203/09E 2,666 47.8 40.1 -31.8 10.6 1.1 10.6 10.0 0.3 10.003/10E 1,853 68.3 57.3 43.0 7.4 1.0 13.7 14.2 0.4 6.7Adj. for extra-ordinary items; Consolidated? We estimate IOC to report a profit of Rs7b (v/s adj. PAT of Rs23.6b in 3QFY08 and adj. net loss of Rs62.6b in2QFY09).? Significant oil price decline during the quarter from US$95/bbl to ~US$40/bbl would lead to significant inventorylosses, impacting the reported refining margins. Contribution from marketing division has reversed from loss to profittowards the end of the quarter.? However, in our estimate, for FY09, majority of the OMCs would require oil bonds in 2HFY09 to end the year inblack. We assume oil bonds of Rs70b to be issued in 4QFY09.? Discounts from upstream are estimated at Rs16.7b (v/s Rs39.8b in 3QFY08) in our model. We do not factor in anyoil bonds in 3QFY09.? On the operational front, we expect throughput at 12.1mmt (flat QoQ and YoY).? Despite significant decline in working capital led by the oil price decline, we expect interest cost to remain high in3QFY09 as 1) IOC turned cash flow positive towards the end of the quarter and 2) is yet to receive Rs88b oil bonds.We expect debt and interest to decline significantly in 4QFY09.? The stock trades at 7.4x FY10E consolidated EPS of Rs57.3 and 1x FY10 P/B. Upgrade to Buy.QUARTERLY PERFORMANCE (STANDALONE)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 528,621 537,085 640,127 718,998 883,996 862,612 497,807 522,021 2,424,831 2,766,435Change (%) 9.0 -7.1 15.0 35.9 67.2 60.6 -22.2 -27.4 12.9 14.1Raw Material Consumed 230,738 196,378 277,267 284,677 339,254 423,603 232,742 193,425 989,060 1,189,024Staff Cost 6,838 7,502 6,954 7,847 15,604 7,289 7,435 7,807 29,142 38,136Fininshed Goods Purchase 253,246 257,097 301,025 379,189 466,350 442,318 225,251 195,434 1,190,557 1,329,352Other Exp (incl Stock Adj) 23,611 24,895 25,205 41,065 53,186 50,343 16,000 16,000 114,777 135,528EBITDA 14,187 51,213 29,675 6,220 9,602 -60,941 16,379 109,355 101,295 74,395% of Net Sales 2.7 9.5 4.6 0.9 1.1 -7.1 3.3 20.9 4.2 2.7Change (%) nm 31.4 17.7 -87.3 -32.3 nm -44.8 1,658.1 1.0 -26.6Depreciation 6,748 6,765 6,663 6,922 6,726 6,775 6,900 7,238 27,097 27,639Interest 3,374 3,335 3,880 4,923 6,142 9,928 9,019 6,075 15,512 31,164Other Income 16,911 12,783 13,463 -1,070 7,490 7,263 6,500 5,700 42,086 26,953PBT 20,976 53,896 32,596 -6,695 4,224 -70,381 6,960 101,742 100,772 42,545Tax 6,291 15,718 11,689 -2,553 72 90 0 14,244 31,145 14,406Rate (%) 30.0 29.2 35.9 38.1 1.7 -0.1 0.0 14.0 30.9 33.9PAT 14,685 38,178 20,907 -4,143 4,151 -70,471 6,960 87,498 69,627 28,139Change (%) nm 32.4 16.7 -114.7 -71.7 -284.6 -66.7 nm 24.5 -59.6Adj. PAT 7,196 36,116 23,576 -6,370 10,451 -62,596 6,960 87,498 60,517 42,313E: MOSL Estimates; Adj. for forex gain/(loss)Harshad Borawake (HarshadBorawake@MotilalOswal.com) Tel: 3982543231 December 2008204

Results PreviewSECTOR: OIL & GASIndraprastha GasSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGIGL INREUTERS CODEIGAS.BO31 December 2008Previous Recommendation: NeutralNeutralRs102Equity Shares (m) 140.052-Week Range 183/921,6,12 Rel. Perf. (%) -7/21/11M.Cap. (Rs b) 14.3M.Cap. (US$ b) 0.3YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 6,141 1,380 9.9 29.7 10.3 3.0 32.6 44.8 2.3 5.403/08A 7,060 1,745 12.5 26.4 8.2 2.5 33.4 47.0 1.8 4.303/09E 8,416 1,860 13.3 6.6 7.7 2.0 29.2 42.0 1.5 3.803/10E 9,196 1,499 10.7 -19.4 9.5 1.8 20.4 29.5 1.3 4.2? We expect IGL to report PAT at Rs490m (v/s Rs450m in 3QFY08 and Rs502m in 2QFY09).? We expect EBITDA margin at 39%. (v/s 42.7% in 3QFY08 and 39.6% 2QFY09).? We expect CNG volumes to grow by 18% YoY to 155mmscm and PNG volumes to grow by 28% YoY to 13.7mmscm.? IGL currently operates 166 CNG stations and plans to add 15-18 new stations in the current year.? Concerns on the likely implications of Petroleum and Natural Gas Regulatory Board (PNGRB) regulations on thecompany remain. IGL has reported high EBITDA margins (40%+) and high RoCE (38-45%) over last three years.The new PNGRB regulation would limit both the network tariff including compression charges (14% post-tax or21.2% pre-tax RoCE). Though we do not expect any large cuts in selling prices in the near term, we believe IGL’sability to pass on the impending gas price hikes would be limited.? The stock trades at 7.7x FY09E EPS of Rs13.3. Neutral.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 1,618 1,741 1,827 1,874 1,907 2,152 2,195 2,162 7,060 8,416Change (%) 19.1 12.9 14.3 14.1 17.9 23.6 20.1 15.4 15.0 19.2Raw Material Consumed 693 746 780 810 844 959 1,017 970 3,029 3,789Staff Cost 36 35 40 42 54 54 54 56 153 217Other Exp (incl Stock Adj) 202 211 227 239 254 288 272 281 878 1,096EBITDA 687 750 780 783 755 851 852 856 3,000 3,314% of Net Sales 42.5 43.1 42.7 41.8 39.6 39.6 38.8 39.6 42.5 39.4Change (%) 27.0 16.2 19.4 10.0 9.9 13.5 9.2 9.3 17.6 10.5Depreciation 156 158 161 151 164 169 183 206 626 721Other Income 40 47 58 89 63 69 65 65 234 261PBT 571 639 678 721 654 752 734 715 2,609 2,855Tax 187 211 227 239 218 249 244 237 864 948Rate (%) 32.8 33.0 33.6 33.2 33.2 33.2 33.2 33.2 33.1 33.2PAT 384 429 450 482 437 502 490 478 1,745 1,907Change (%) 39.0 23.2 26.9 20.2 13.7 17.2 8.9 -0.8 26.4 9.3E: MOSL EstimatesHarshad Borawake (HarshadBorawake@MotilalOswal.com) Tel: 3982543231 December 2008205

Results PreviewSECTOR: OIL & GASSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGMRPL INREUTERS CODEMRPL.BO31 December 2008Previous Recommendation: SellMRPLSellRs41Equity Shares (m) 1,752.652-Week Range 149/301,6,12 Rel. Perf. (%) 14/7/-17M.Cap. (Rs b) 72.1M.Cap. (US$ b) 1.5YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 286,331 5,255 3.0 41.4 13.7 2.6 20.4 20.0 0.3 6.303/08A 327,179 10,979 6.7 124.8 6.1 1.9 38.9 27.6 0.3 4.303/09E 355,403 9,153 6.5 -3.6 6.3 1.6 22.2 19.7 0.3 5.803/10E 272,073 5,325 3.0 -53.3 13.5 1.5 11.6 8.6 0.4 9.9? We estimate MRPL to report losses of Rs1.3b (v/s adj. PAT of Rs3.4b in 3QFY08 and Rs1.5b in 2QFY09) led bylikely inventory losses in the quarter.? Significant oil price decline in the quarter from US$95/bbl to ~US$40/bbl would lead to significant inventory losses,impacting the reported refining margins. MRPL had reported inventory loss of US$9.2/bbl in 2QFY09 when oil haddeclined US$43/bbl.? On the operating front, we expect refinery throughput at 2.6mmt (down 14% YoY and 21% QoQ) due to shutdownfor maintenance.? MRPL has revised the Phase III refinery upgradation and expansion (9.69 to 15mmtp) costs by 56% to Rs124b. Theexpansion is expected to be completed by October 2011.? The stock trades at 6.3x FY09E EPS of Rs6.5 and EV/EBITDA of 5.8x on FY09E. We maintain Sell.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 74,391 76,404 81,383 95,001 107,466 134,280 53,485 60,171 327,179 355,403Change (%) 15.0 -5.1 11.3 39.8 44.5 75.7 -34.3 -36.7 14.3 8.6RM Consumed (incl. inv chg) 66,664 70,467 73,777 88,847 89,394 130,544 52,800 56,029 299,755 328,767Staff Cost 143 354 253 496 442 217 222 226 1,246 1,107Other Expenditure 1,400 1,084 1,872 1,352 3,776 2,108 745 731 5,708 7,359EBITDA 6,186 4,499 5,480 4,306 13,855 1,410 -282 3,186 20,470 18,169% of Net Sales 8.3 5.9 6.7 4.5 12.9 1.1 -0.5 5.3 6.3 5.1Change (%) 21 217 100 -26 124 -69 -105 -26 35.6 -11.2Depreciation 938 947 948 946 952 962 981 1,055 3,778 3,950Interest 398 358 362 358 364 379 386 390 1,476 1,519Other Income 1,333 386 308 89 648 369 377 107 2,116 1,500PBT 6,183 3,580 4,479 3,090 13,187 439 -1,272 1,847 17,332 14,201Tax 2,498 785 1,534 346 4,489 -185 0 0 5,164 4,304Prior Year Tax Adjustment 0 0 0 1,190 244 375 0 0 1,190 619MAT Credit Entitlement Adjusted 0 -523 0 -699 0 0 0 0 0 0Rate (%) 40 22 34 11 36 -42 0 0 29.8 30.3PAT 3,686 3,317 2,944 2,254 8,454 249 -1,272 1,847 12,201 9,278Change (%) 70.7 3,470.9 148.6 23.9 129.4 -92.5 -143.2 -18.0 132.2 -24.0Adj. PAT* 2,873 3,151 3,381 2,410 9,293 1,526 -1,272 1,847 11,815 11,393E: MOSL Estimates; * Adjuusted for MAT credit and forex gain/(loss)Harshad Borawake (HarshadBorawake@motilaloswal.com) Tel: 3982543231 December 2008206

Results PreviewSECTOR: OIL & GASONGCSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGONGC INREUTERS CODEONGC.BOEquity Shares (m) 2,138.952-Week Range (Rs) 1,357/5381,6,12 Rel. Perf. (%) -10/10/6M.Cap. (Rs b) 1,428.0M.Cap. (US$ b) 29.4QUARTERLY PERFORMANCE (STANDALONE)31 December 2008Previous Recommendation: NeutralYEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS B) (RS B) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 823 178 83.1 15.4 8.0 2.2 29.0 27.9 1.5 3.303/08A 968 199 92.9 11.8 7.2 1.8 27.7 27.3 1.2 2.803/09E 1,171 228 106.5 14.7 6.3 1.5 26.9 27.5 0.9 2.403/10E 988 209 97.8 -8.2 6.8 1.4 21.2 21.5 1.0 2.4Consolidated(RS BILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENeutralNet Sales 136.9 154.1 151.2 156.3 200.5 174.1 153.1 132.2 598.5 659.9Change (%) -6.3 9.6 -2.9 26.0 46.5 12.9 1.3 -15.4 5.7 10.3Raw Material and Purchases 13.6 16.1 16.4 24.7 27.7 29.5 22.7 19.8 70.8 99.7Statutory Levies 29.0 32.0 32.3 33.8 31.4 31.3 28.7 24.6 127.1 115.9Employee Costs 2.5 3.7 3.6 1.6 2.9 2.8 3.0 3.3 11.5 11.9Other Exp (incl Stock Adj) 12.6 18.2 18.6 38.3 21.0 26.3 14.4 9.1 87.7 70.9EBITDA 79.2 84.2 80.3 57.8 117.6 84.1 84.4 75.4 301.5 361.5% of Net Sales 57.9 54.6 53.1 37.0 58.6 48.3 55.1 57.0 50.4 54.8Change (%) -2.3 14.6 -9.8 7.5 48.4 0.0 5.1 30.5 1.4 19.9D,D & A 17.5 19.9 22.1 38.4 28.0 21.8 24.0 29.4 98.0 103.2Interest 0.0 0.3 0.1 0.1 0.0 1.0 0.3 0.2 0.6 1.5Other Income 8.4 12.1 8.6 20.3 10.5 14.9 10.5 9.4 49.5 45.3PBT 70.0 76.1 66.7 39.5 100.0 76.2 70.6 55.2 252.3 302.1Tax 23.9 25.1 23.1 13.3 34.1 28.1 24.4 19.0 85.3 105.7Rate (%) 34.2 33.0 34.6 33.6 34.1 36.9 34.5 34.5 33.8 35.0PAT 46.1 51.0 43.7 26.3 65.9 48.1 46.3 36.2 167.0 196.4Change (%) 11.9 13.8 -6.4 1.7 43.0 -5.7 5.9 37.6 5.4 17.6Adjusted PAT 46.1 51.0 43.7 26.3 66.4 48.1 46.3 36.2 167.0 196.9E: MOSL EstimatesRs668? We estimate ONGC to report PAT at Rs46.3b (v/s Rs43.7b in 3QFY08 and Rs48b in 2QFY09). We expect EBITDAat Rs84.4b (v/s Rs80b in 3QFY08 and Rs84b in 2QFY09).? We factor in oil production (excl. JV) of 6.4mmt (v/s down 3% YoY and flat QoQ) and gas production (excl JV) of5.8bcm (flat YoY and up 2% QoQ).? We estimate gross realization at US$59.6/bbl versus US$91/bbl in 3QFY08 and US$119.4/bbl in 2QFY09.? Subsidy sharing has remained ad hoc historically. We factor in one-third sharing by upstream for FY09 in our estimates.For 3QFY09, we assume discounts by ONGC at Rs25b (v/s Rs60.8b in 3QFY08 and Rs126.6b in 2QFY09).? As gas price hike recommended by tariff commission is yet to be notified (pending for more than year now), we donot build any price hikes for FY09. From FY10, we model moderate gas price hikes of 5%.? In 3QFY09, ONGC’s offer to Imperial Energy Corporation Plc (IEC LN) shareholders received 96.8% acceptanceclearing the way for its acquisition. Acquisition price of 1,250 pence /share implies the value for IEC’s 2P reserves atUS$2.8/boe and for its 1P reserves at US$14.6/boe.? Our Brent oil price assumption is US$86/bbl and US$60/bbl for FY09 and FY10 respectively. Stock trades at 6.3xFY09E consolidated EPS of Rs106.5. Neutral.Harshad Borawake (HarshadBorawake@MotilalOswal.com) Tel: 3982543231 December 2008207

Results PreviewSECTOR: OIL & GASReliance IndustriesSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGRIL INREUTERS CODERELI.BOEquity Shares (m) 1,573.452-Week Range 3,252/9301,6,12 Rel. Perf. (%) 3/-13/-5M.Cap. (Rs b) 1,935.6M.Cap. (US$ b) 39.8QUARTERLY PERFORMANCE31 December 2008Previous Recommendation: BuyYEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS B) (RS B) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 1,117 119 82.2 31.7 15.0 2.8 22.4 18.7 1.8 10.203/08A 1,334 153 105.0 27.7 11.7 2.2 21.5 17.5 1.6 9.103/09E 1,618 151 95.7 -8.9 12.9 1.8 16.1 14.1 1.3 9.003/10E 1,892 222 140.2 46.6 8.8 1.6 18.3 16.0 1.1 6.1FY10E includes RPL financials(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 295,240 320,430 345,900 372,860 415,790 447,870 397,156 357,329 1,334,430 1,618,145Change (%) 13.6 6.6 22.7 35.8 40.8 39.8 14.8 -4.2 19.5 21.3Raw Material Consumed 208,880 233,540 258,380 280,980 315,100 345,320 308,538 268,742 981,780 1,237,700Staff Cost 4,960 4,710 5,770 5,760 6,510 5,880 6,174 6,402 21,200 24,966Other Expenses 24,670 24,370 23,420 25,930 32,970 31,930 26,510 26,745 98,390 118,155EBITDA 56,730 57,810 58,330 60,190 61,210 64,740 55,934 55,439 233,060 237,324% of Net Sales 19.2 18.0 16.9 16.1 14.7 14.5 14.1 15.5 17.5 14.7Change (%) 22.4 14.2 12.6 16.4 7.9 12.0 -4.1 -7.9 16.3 1.8Depreciation 11,250 11,290 12,130 13,800 11,510 12,640 12,750 13,072 48,470 49,972Interest 2,950 2,570 2,530 2,720 2,940 4,370 4,392 3,898 10,770 15,600Other Income 1,970 1,680 2,410 2,890 2,260 1,510 1,812 2,245 8,950 7,827PBT 44,500 45,630 46,080 46,550 49,020 49,240 40,605 40,713 182,770 179,578Tax 8,200 7,260 7,260 7,430 7,920 8,020 6,659 6,471 30,150 29,070Rate (%) 18.4 15.9 15.8 16.0 16.2 16.3 16.4 15.9 16.5 16.2Adjusted PAT 36,300 38,370 38,820 39,120 41,100 41,220 33,945 34,243 152,620 150,508Change (%) 34.1 27.9 26.0 24.0 13.2 7.4 -12.6 -12.5 27.8 -1.4Reported PAT 36,300 38,370 80,790 39,120 41,100 41,220 33,945 34,243 194,580 150,508E: MOSL Estimates; including IPCLBuyRs1,230? We expect RIL to report PAT of Rs33.9b in 3QFY09 (v/s adj. PAT of Rs38.8b in 3QFY08 and Rs41.2b in 2QFY09).? We estimate GRM at ~US$9/bbl, assuming a premium of US$5.4/bbl over Benchmark Singapore (v/s reportedpremium of US$7.7/bbl in 3QFY08 and US$7.6/bbl in 2QFY09). Singapore GRM at ~US$3.6/bbl is down 53% YoY(US$7.7/bbl in 3QFY08) and down 38% QoQ (US$5.8/bbl in 2QFY09).? Polymer prices declined 10-13% YoY and 32-36% QoQ, while polyester prices were down 6-8% YoY and ~17%QoQ. We expect the petchem segment to be negatively impacted by lower operating rates in the quarter.? RIL has started production of oil from its KG-D6 block in September and has commenced crude processing at itsnew RPL refinery (we factor in RPL's commercial production from April 2009). Gas production is expected to beginin 4QFY09.? RIL had significant cash infusion in 3QFY09 with Rs151b coming through warrant conversion by promoters. Further,media reports indicate that the company has raised additional debt of Rs120b during the quarter.? Pending litigation with RNRL would be the key issue to watch out for in the near term, in our view. Next hearing isscheduled for 12 January 2009.? The stock trades at 8.8x FY10E EPS. We include RPL and revenue from its KG-D6 gas only from FY10. Wecontinue to be positive primarily due to large potential upsides from E&P. We maintain Buy.Harshad Borawake (HarshadBorawake@motilaloswal.com) Tel: 3982543231 December 2008208

Results PreviewQUARTER ENDING DECEMBER 2008PharmaceuticalsBSE Sensex: 9,647 S&P CNX: 2,959 31 December 2008COMPANY NAMEAventis PharmaBioconCadila HealthcareCiplaDishman PharmaDivi’s LaboratoriesDr Reddy’s Labs.GSK PharmaGlenmark PharmaJubilant OrganosysLupinPiramal HealthcareRanbaxy Labs.Sun PharmaceuticalsWockhardtCurrency depreciation to benefit operations, PAT impacted by forex lossesand consolidation of acquired companiesMOSL Pharma universe sales growth for 3QFY09E is likely to be positive at 21% YoY,driven by strong performance of mid-cap generic and CRAMS companies (~28% YoYgrowth) led mainly by commercialization of their product pipeline in regulated markets,traction in CRAMS business and consolidation of acquired companies. MNC pharmacompanies are expected to report only 7% growth, due to a 12.4% decline in exportsand lower sales of Rabipur and Soframycin in domestic market for Aventis. The Big-3generic companies are likely to report 14% topline growth led by Cipla and DRL. Ranbaxyis likely to report single-digit topline growth due to ongoing US FDA issues.TREND IN GROWTH / PROFITABILITY OF DIFFERENT SEGMENTS OF THE INDUSTRY (OCT-DEC QUARTER)INQUIRE PHARMA UNIVERSE YOY GR. (%) EBITDA MARGIN (RS M) NP MARGIN (RS M)AGGREGATES SALES EBITDA ADJ DEC DEC CHG DEC DEC CHGPAT 08 07 (BPS) 08 07 (BPS)MNC Pharma (Aventis, GSK) 7.0 11.7 10.3 23.5 22.5 100 20.9 20.2 63Indian Big-3 (Cipla, DRL, Ranbaxy) 14.1 -2.0 20.1 14.1 16.4 -231 7.4 7.0 37Other Indian Pharma 27.7 17.0 -4.7 25.9 28.2 -235 16.1 21.5 -546Sector Aggregate 21.0 11.3 0.8 21.3 23.1 -187 13.0 15.6 -260Source: MOSLEXPECTED QUARTERLY PERFORMANCE SUMMARYRECO SALES EBITDA NET PROFIT(RS MILLION)DEC.08 CHG. (%) DEC.08 CHG. (%) DEC.08 CHG. (%)PharmaceuticalsAventis Pharma Buy 2,093 2.6 318 9.8 301 11.5Biocon Buy 4,201 77.2 781 32.3 271 -48.8Cadila Health Buy 7,116 22.8 1,341 29.5 630 14.7Cipla Neutral 12,920 17.0 2,722 3.8 1,502 -28.7Dishman Pharma Buy 2,650 28.3 599 50.2 128 -60.2Divis Labs Buy 3,723 31.0 1,772 58.1 1,515 50.6Dr Reddy’ s Labs Buy 14,978 21.6 2,069 49.6 1,289 LPGlenmark Pharma Neutral 6,447 -5.1 2,066 -42.4 1,319 -52.9GSK Pharma Buy 3,719 9.6 1,048 12.4 911 9.9Jubiliant Organosys Buy 9,833 53.3 1,948 50.4 573 -37.1Lupin Buy 9,066 25.7 1,629 34.1 1,074 1.3Piramal Healthcare Buy 8,650 18.1 1,720 41.9 976 25.4Ranbaxy Labs Neutral 20,436 7.5 2,038 -31.2 770 -55.0Sun Pharma Buy 10,964 38.7 4,740 33.7 4,590 44.2Wockhardt Neutral 9,271 21.7 2,016 6.1 488 -51.0Sector Aggregate 126,066 21.0 26,806 11.3 16,337 0.8Nimish Desai (Nimishdesai@MotilalOswal.com); Tel: +91 22 3982540631 December 2008209

PharmaceuticalsOverall EBITDA margins for MOSL Pharma universe are expected to decline by 187bpYoY, led by a 231bp decline for the Indian pharmaceutical companies (excluding MNCs)and a 100bp improvement for the MNC companies. It should be noted that the overallmargin decline is mainly driven by Glenmark (which earned Rs1.79b of NCE out-licensingincome for 3QFY08) and by the ongoing US FDA issues at Ranbaxy (which will significantlyimpact US revenues). Excluding the NCE impact for Glenmark and ignoringRanbaxy, overall EBITDA is likely to record 28.1% growth YoY while EBITDAmargin is likely to be flat at 23.4% for the quarter partly impacted by consolidationof acquired companies and forex losses at operational level for some companies.Overall, we expect MOSL Pharma universe’s PAT to grow by only 1% YoY, with the Big-3 Pharma companies reporting 20% growth due to significant low base for DRL (it hadreported a net loss of Rs851m for 3QFY08). Cipla’s bottomline growth will be impacteddue to significant high base and forex losses for 3QFY09 on currency hedges. Ranbaxy’sPAT is likely to record 55% decline due to the US FDA ban and forex losses on foreigncurrency loans and hedges. MNC Pharma segment is expected to report PAT growth of10.3% YoY and the other Indian Pharma group is expected to report PAT decline of 4.7%due to forex losses on foreign currency loans and currency hedges. Adjusted for Glenmark’sNCE out-licensing income for 3QFY08, the Indian Pharma Group (excluding the Big-3) islikely to record 9.5% PAT growth.Rupee depreciation will lead to MTM translation forex lossesWith rupee depreciating by 3% QoQ, many pharmaceutical companies would face MTMtranslational forex losses on outstanding foreign currency loans, albeit lower than thatexperienced in 2QFY09. Operationally, exporters will benefit by recording higher toplinegrowth, but significant forward covers will prevent any major growth in operational PAT.Companies like Ranbaxy and Jubilant Organosys are likely to report significant MTMforex losses on foreign currency loans. The exact quantum of the forex losses will becontingent on the closing INR/US$ rate as on 31 December 2008.INDIAN RUPEE V/S THE US$36Dec-07Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-0840444852Source: Bloomberg31 December 2008210

PharmaceuticalsThe table below gives details of forex losses/gains reported by pharmaceutical companiesin 1HFY09 v/s 1HFY08. For 1QFY09, the INR depreciated by 7.2% v/s the US$ and by9% in 2QFY09. It has further declined by 3% in the September-December 2008 period.FOREX GAIN/(LOSS) (RS M)INR/US$ 1QFY08 1QFY09 2QFY08 2QFY09Appreciation (%) 1.1 - 2.1 -Depreciation (%) - 7.2 - 9.0CompaniesBiocon (22) (64) (22) (255)Cadila 91 24 15 (270)Cipla 86 (747) 200 (1045)Dishman 60 (165) 67 (310)Dr. Reddy’s Labs 285 (147) 256 (296)Jubilant 879 (1076) 289 (1742)Piramal Healthcare 48 (208) 80 (408)Ranbaxy 1614 (1500) 1377 (3717)Source: Companies/MOSLUS business to record double-digit growthWe expect most of the generic companies to report double-digit topline growth for the USbusiness (excluding upsides from patent challenges) driven mainly by increased pace ofnew product launches and the 3% depreciation of the INR v/s the US$. This is especiallytrue for the tier-2 generic companies, for which, past product filings with the US FDA arenow coming up for approvals leading to increased pace of new launches. The exception tothis trend will be Ranbaxy which will witness a 40-50% decline in US revenues due to theongoing US FDA ban.RoW markets continue to post double-digit growth…The size of the semi-regulated markets is expected to increase from US$46b in 2006 toUS$74b-US$60b by 2011. The opportunity spans more than 150 markets through LatinAmerica, Asia, Eastern Europe and Australia. The current market share of Indian companiesis merely about 6%, implying that there is substantial room for growth. Secondly, most ofthese markets are branded generic markets, thus, resulting in better margins (GPM ofabout 60-70% compared with about 40-50% for the US). Indian generic companies havealready established a reasonable presence in some of these markets (like Russia, Latam)while they are in the process of strengthening their presence in some of the other markets(like China, Australia, New Zealand). We expect most of the Indian generic companies toreport strong double-digit growth in RoW markets, partly helped by a stronger US$.31 December 2008211

Pharmaceuticals…but liquidity/credit squeeze may pose some risksWe believe that the Indian generic companies may face some risks linked to the ongoingliquidity/credit squeeze. Some of the key risks to watch out for over the next few quarterswill be:1. Extended working capital cycles and credit losses in emerging markets – Ranbaxyand DRL are most exposed to these markets.2. Slowdown in CRAMS business from small and mid-sized research/biotech companies– most of the CRAMS players have some exposure to this segment but not significant.DRL’s evolving CPS business also has some exposure to this segment.Top generic companies are unlikely to record any significant increase inEBITDA marginThe larger generic companies are unlikely to record any significant EBITDA marginexpansion (excluding patent challenge upsides) due to:1. Significant forward covers on receivables, which are likely to last for a few morequarters, thus tempering down the upsides from a depreciating currency.2. A well diversified geographical revenue base, which reduces the sensitivity to revenuesdenominated in the US$.3. Having a ground presence in the US, implying that costs for such operations are likelyto increase due to a depreciating currency.AOK tender in Germany likely to attract lower marginsAOK has recently given out broad details on the award of the biggest insurance tender forthe healthcare industry in Germany. DRL (the most exposed company to the Germanmarket from India) has been awarded tenders for 8 products of the total 64. It will be thesole supplier for about 4-5 products across all the 5 geographical regions while for theremaining products, it will be the sole supplier only for a few regions. While value detailsfor the tender are not yet available, we believe that the generic companies have beenaggressive bidders and hence it is likely to lead to further erosion of margins for DRL(although volumes will get a boost). The supplies under the tender are likely to commencefrom March 2009 spread over two years.Increasing costs and acquisitions to impact tier-2 generic companiesAdjusted for Glenmark’s NCE out-licensing income, our universe of tier-2 genericcompanies is likely to record 31.8% growth in topline led by an expanding product pipelineand increasing contribution from emerging markets coupled with a depreciating currencyand consolidation of acquired companies. However, overall EBITDA margins for thesetier-2 generic companies are expected to remain flat at 26%, due to consolidation ofacquired companies (which attract lower EBITDA margins) and forward covers onreceivables. Consolidation of AxiCorp acquisition for Biocon will result in a 633bp declinein EBITDA margins for the company, thus impacting overall margins for the tier-2 genericcompanies. Lower EBITDA margins and MTM forex losses on foreign debt will restrictPAT growth for these companies to 9.5% for the quarter.31 December 2008212

PharmaceuticalsCRAMS players to report good operational performanceWe expect our universe of CRAMS companies (Dishman, Divi’s, Piramal Healthcare andJubilant) to record strong 33% topline growth led mainly by increased outsourcing businessand consolidation of acquired companies. Combined EBITDA margins for these companiesare likely to expand by 270bp to 24.3% led mainly by an expanding topline. However, PATfor the quarter is likely to grow by only 5.8% due to significant MTM forex losses forJubilant Organosys and Dishman Pharma on outstanding FCCBs and foreign loans.MNC performance continues to be lacklusterWe expect our MNC pharmaceutical universe (Aventis and GSK) to record 7% toplinegrowth for the quarter due to a 12.4% decline in exports and lower sales of Rabipur andSoframycin in domestic market for Aventis. EBITDA margins are expected to expand by100bp led mainly by a 99bp margin expansion for Aventis (on a significantly low base).PAT is expected to grow by 10.3% for the quarter.OutlookGenericsWe believe that the worst is over for Indian generic companies and expect gradualimprovement in their performance over the next two years. Emerging markets and someWestern European markets are likely to be key revenue drivers in the short-to-mediumterm. Japan will be the next frontier of growth for generics in the long term.Geographically diversified operations, a pragmatic mix of IPR driven low competition andnormal products, vertically integrated operations and a differentiated business model arethe key perquisites for success in the generics space. Our top picks in the generic spaceare Dr Reddy’s, Sun Pharma and Lupin.CRAMSWe also believe that the Indian contract-manufacturing segment will see strong doubledigitsecular growth (given India’s advantages) with the financial impact visible from FY09.Divi’s Labs and Piramal Healthcare remain our top pick amongst the CRAMS players.MNC PharmaWe remain favorably inclined towards MNC Pharma stocks in the long term. In our view,the current risk-reward equation is stacked in favor of MNC stocks. Leading PharmaMNCs are geared to gain from the opportunities arising in the stronger patent regime post2005. We remain bullish on the long-term prospects of these companies. The potentialupside from product patents would create ‘option value’ in these stocks over the longerterm. It should be noted that some of the patented products may be launched by the parentthrough the 100% subsidiary route. However, we believe that most of the mass-marketproducts (which need a large field force for promotion) are likely to be launched throughthe listed entities. GSK Pharma remains our top pick amongst MNCs.31 December 2008213

PharmaceuticalsStock performance and valuationsSTOCK PERFORMANCE (%)ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARPharmaceuticalsAventis Pharma 19 -18 44 34 38 10Biocon -35 -60 -10 -7 -15 -32Cadila Health -14 -15 11 37 6 13Cipla -18 -12 7 40 1 16Dishman Pharma -55 -63 -30 -10 -36 -35Divis Labs 0 -28 25 24 20 -1Dr Reddy’s Labs -8 -36 17 16 12 -8Glenmark Pharma -40 -50 -15 2 -21 -23GSK Pharma -3 11 22 64 16 39Jubiliant Organosys -58 -65 -33 -13 -38 -38Lupin -14 -3 11 50 5 25Piramal Healthcare -28 -33 -3 19 -9 -6Ranbaxy Labs 2 -41 27 12 21 -13Sun Pharma -27 -13 -2 40 -8 15Wockhardt -30 -74 -5 -22 -11 -46RELATIVE PERFORMACE - 3 MONTHS (%) RELATIVE PERFORMANCE - 1 YEAR (%)125SensexMOSL Pharmaceuticals Index120MOSL Pharmaceuticals IndexSensex1001007580506025Sep-08 Oct-08 Nov-08 Dec-0840Dec-07 Mar-08 Jun-08 Sep-08 Dec-08COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EPharmaceuticalsAventis Pharma 953 Buy 62.7 63.5 67.6 15.2 15.0 14.1 10.2 9.6 8.4 21.5 20.1 19.9Biocon 117 Buy 11.3 9.6 15.9 10.4 12.1 7.3 7.2 7.5 5.2 15.3 10.0 14.7Cadila Health 268 Buy 20.5 26.3 32.6 13.0 10.2 8.2 7.8 6.2 4.8 27.3 27.8 29.9Cipla 187 Neutral 9.0 9.2 13.3 20.7 20.4 14.0 17.5 13.3 11.2 18.7 16.5 20.2Dishman Pharma 139 Buy 15.0 10.2 22.5 9.3 13.6 6.2 11.5 7.5 6.1 27.3 13.6 25.2Divis Labs 1,339 Buy 53.8 79.8 100.8 24.9 16.8 13.3 21.3 13.8 10.8 49.5 48.3 42.4Dr Reddy’ s Labs 470 Buy 27.8 30.7 46.9 16.9 15.3 10.0 12.7 9.9 8.2 9.9 10.1 12.3GSK Pharma 1,147 Buy 47.2 53.3 63.6 24.3 21.5 18.0 16.6 14.6 12.2 29.4 27.5 27.1Glenmark Pharma 295 Neutral 12.0 15.5 23.0 24.7 19.0 12.8 10.2 10.8 7.4 20.8 20.1 22.4Jubiliant Organosys 119 Buy 22.3 9.9 29.3 5.3 12.0 4.1 7.2 5.9 4.5 38.2 12.3 27.9Lupin 618 Buy 37.8 49.7 63.5 16.3 12.4 9.7 13.8 9.3 7.5 31.0 30.4 30.9Piramal Healthcare 239 Buy 17.4 18.7 25.6 13.7 12.8 9.3 10.4 8.4 6.8 34.0 32.3 35.5Ranbaxy Labs 252 Neutral 13.3 8.6 12.5 19.0 29.3 20.2 16.4 12.3 11.8 19.1 6.6 8.0Sun Pharma 1,065 Buy 71.8 52.2 63.9 14.8 20.4 16.7 12.1 16.2 13.0 38.3 19.9 20.6Wockhardt 108 Neutral 29.0 18.7 35.2 3.7 5.8 3.1 5.7 5.1 4.4 29.6 16.2 22.4Sector Aggregate 15.8 16.9 12.1 12.4 10.6 8.5 24.1 17.1 20.231 December 2008214

Results PreviewSECTOR: PHARMACEUTICALSSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGHOEC INREUTERS CODEHOEC.BO31 December 2008Previous Recommendation: BuyAventis PharmaBuyRs953Equity Shares (m) 23.052-Week Range 1,190/6621,6,12 Rel. Perf. (%) 11/56/34M.Cap. (Rs b) 22.0M.Cap. (US$ b) 0.5YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END* (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA12/06A 8,821 1,693 73.5 3.2 13.0 3.7 28.6 42.0 2.1 8.212/07A 8,735 1,444 62.7 -14.7 15.2 3.3 21.5 33.1 2.0 10.212/08E 9,227 1,510 65.6 4.6 14.5 2.9 20.1 31.4 1.8 9.612/09E 9,910 1,662 72.2 10.0 13.2 2.6 19.9 30.1 1.5 8.4* Standalone results? APL’s 4QCY08 topline is expected to grow by only 2.6% to Rs2b led by 5.5% growth in the domestic formulationsbusiness. Export revenues at Rs290m are expected to record a decline of 12.4%.? EBITDA margin is expected to improve by 100bp led mainly by lower other expenses for the quarter.? PAT growth is estimated at 11.5% to Rs301m impacted mainly by lower topline growth.? We believe that APL will be one of the key beneficiaries of the patent regime in the long term. The parent has astrong R&D pipeline with a total of 127 products under development, of which 36 are in Phase II(b) and Phase-III,some of which are likely to be launched in India. Topline growth continues to be elusive and is thus impacting marginsand earnings for APL. It is currently valued at 14.5x CY08E and 13.2x CY09E. While valuations are not demanding,we believe that the stock price performance is likely to be muted till clarity emerges on export performance andRabipur supplies (from Novartis).QUARTERLY PERFORMANCE (STANDALONE)(RS MILLION)Y/E DECEMBER CY07 CY08 CY07 CY08E1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QENet Sales 2,129 2,302 2,264 2,040 2,169 2,486 2,479 2,093 8,735 9,227YoY Change (%) 6.2 3.3 -6.9 -6.2 1.9 8.0 9.5 2.6 328.2 5.6Total Expenditure 1,635 1,857 1,818 1,750 1,764 1,982 2,000 1,775 7,060 7,521EBITDA 494 445 446 290 405 504 479 318 1,675 1,706Margins (%) 23.2 19.3 19.7 14.2 18.7 20.3 19.3 15.2 19.2 18.5Depreciation 45 47 47 46 51 44 43 47 185 185Interest 0 0 2 0 0 0 0 0 2 0Other Income 200 182 176 182 189 196 253 200 740 838PBT after EO Items 649 580 573 426 543 656 689 472 2,228 2,360Tax 216 207 205 156 198 238 243 170 784 849Effective tax Rate (%) 33.3 35.7 35.8 36.6 36.5 36.3 35.3 36.1 35.2 36.0Reported PAT 433 373 368 270 345 418 446 301 1,444 1,510Adj PAT 433 373 368 270 345 418 446 301 1,444 1,510YoY Change (%) 17.3 -15.0 -31.6 -22.2 -20.3 12.1 21.2 11.5 434.7 4.6Margins (%) 20.3 16.2 16.3 13.2 15.9 16.8 18.0 14.4 16.5 16.4E: MOSL EstimatesNimish Desai (Nimishdesai@MotilalOswal.com); Tel: +91 22 3982540631 December 2008215

Results PreviewSECTOR: PHARMACEUTICALSSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGBIOS INREUTERS CODEBION.BO31 December 2008Previous Recommendation: BuyBioconBuyRs117Equity Shares (m) 200.052-Week Range 315/871,6,12 Rel. Perf. (%) 23/-13/-7M.Cap. (Rs b) 23.3M.Cap. (US$ b) 0.5YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 9,863 2,002 10.0 -42.5 11.6 2.2 18.7 17.0 2.5 8.603/08A 10,540 2,250 11.3 12.4 10.4 1.6 15.3 14.6 2.0 7.203/09E 16,137 1,589 7.9 -29.4 14.7 1.5 10.0 9.2 1.5 7.503/10E 20,379 2,635 13.2 65.8 8.8 1.3 14.7 13.8 1.1 5.2? Biocon’s 3Q topline is expected to grow by 77% mainly due to consolidation of AxiCorp (Germany) operations whichwill contribute about Rs1.34b in revenues for the quarter. Organic topline growth for the quarter is likely to be 20%led by a 40% increase in contract research revenues due to favorable currency and gradual scale-up of the BMScontract.? EBITDA margin is expected to decline by almost 630bp as AxiCorp’s EBITDA margin is lower than that of Biocon.Absence of licensing income is also likely to pressurize EBITDA margin.? The recent depreciation of the INR v/s the US$ is likely to result in increased MTM losses on foreign currency loansresulting in a 49% decline in PAT.? Traction in the company’s Insulin and contract research initiative, coupled with incremental contribution fromimmunosuppressants should augur well for Biocon’s FY09/10 performance. However, higher R&D costs, significantcapex (leading to increase in depreciation), higher expenses linked to the scale-up of the domestic formulationsbusiness and currency hedging, will continue to temper earnings growth. We have lowered our FY10 earningsestimates by 17% to take into account higher depreciation and lower other income as well as a favorable currency.Biocon is currently valued at 14.7x FY09E and 8.8x FY10E earnings. Maintain Buy.QUARTERLY PERFORMANCE (CONSOLIDATED)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q* 3QE 4QENet Sales 2,710 2,790 2,370 2,670 2,639 4,427 4,201 4,870 10,540 16,137YoY Change (%) 27.8 12.0 -4.0 -4.0 -2.6 58.7 77.2 82.4 6.9 53.1Total Expenditure 1,945 1,985 1,779 1,840 2,063 3,598 3,419 3,895 7,550 12,975EBITDA 765 805 591 830 576 830 781 975 2,990 3,162Margins (%) 28.2 28.8 24.9 31.1 21.8 18.7 18.6 20.0 28.4 19.6Depreciation 216.4 233.6 240.0 250.0 253.0 290.4 310.0 328.4 940.0 1,181.8Interest 27.5 26.7 25.8 20.0 37.0 42.2 40.0 45.0 100.0 164.2Other Income 9.9 19.2 210.9 120.0 -129.0 -190.2 -150.0 349.6 360.0 -119.6PBT 531 564 536 680 157 307 281 952 2,310 1,697Tax 15 38 18 60 17 59 16 44 130 136Rate (%) 2.8 6.7 3.3 8.8 10.8 19.2 5.6 4.6 5.6 8.0Minority Interest -14 -14 -12 -30 -10 -6 -6 -6 -70 -28PAT 530 540 530 650 150 254 271 913 2,250 1,589YoY Change (%) 34.5 19.0 -5.3 7.1 -71.7 -52.9 -48.8 40.5 12.0 -29.4Margins (%) 19.6 19.3 22.4 24.3 5.7 5.7 6.5 18.8 21.3 9.8E: MOSL Estimates; * AxiCorp (Germany) to start contributing from 2QFY09 onwardsNimish Desai (Nimishdesai@MotilalOswal.com); Tel: +91 22 3982540631 December 2008216

Results PreviewSECTOR: PHARMACEUTICALSSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGCDH INREUTERS CODECADI.BO31 December 2008Previous Recommendation: BuyCadila HealthcareBuyRs268Equity Shares (m) 125.652-Week Range 347/2031,6,12 Rel. Perf. (%) 13/18/37M.Cap. (Rs b) 33.6M.Cap. (US$ b) 0.7YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END* (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 18,288 2,343 18.7 43.5 14.3 3.9 29.9 24.1 2.0 10.503/08A 23,245 2,632 20.5 9.9 13.0 3.2 26.7 23.6 1.6 8.103/09E 28,433 3,304 26.3 28.2 10.2 2.6 27.8 22.7 1.3 6.603/10E 33,307 4,445 32.6 23.8 8.2 2.2 29.9 25.3 1.1 5.2? Cadila’s 3Q topline is likely to record 22.8% growth led by 35% growth in exports. The company’s US revenues willshow increased traction due to the recent depreciation of the INR v/s the US$. Domestic revenues are expected togrow by 11.2% for the quarter.? EBITDA margin is likely to expand by 90bp led by lower other expenses.? PAT is likely to record 15% growth to Rs630m for the quarter. The recent depreciation of the INR v/s the US$ islikely to result in increased MTM losses on foreign currency loans.? We expect Cadila to record 26% earnings CAGR for FY08-10. Our estimates take into account the proposeddemerger of the consumer business and related equity dilution. Traction in international business, commencement ofHospira supplies coupled with a de-risked business model should ensure good long-term potential for the company.Cadila is currently valued at 10.2x FY09E, and 8.2x FY10E consolidated earnings. We believe that valuations areattractive given the expected traction in the business. Reiterate Buy.QUARTERLY PERFORMANCE (CONSOLIDATED)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Revenues 5,722 6,092 5,794 5,637 6,985 7,566 7,116 6,767 23,245 28,433YoY Change (%) 28.4 28.3 22.7 29.4 22.1 24.2 22.8 20.0 312.4 22.3Total Expenditure 4,610 4,780 4,759 4,498 5,524 5,884 5,775 5,662 18,647 22,845EBITDA 1,112 1,312 1,035 1,139 1,461 1,681 1,341 1,105 4,598 5,587Margins (%) 19.4 21.5 17.9 20.2 20.9 22.2 18.8 16.3 19.8 19.7Depreciation 239 235 270 225 246 259 290 324 969 1,119Interest 73 137 121 113 148 99 160 184 444 592Other Income 94 15 57 -48 27 -269 -150 488 118 97PBT before EO Income 894 955 701 753 1,094 1,054 741 1,085 3,303 3,974EO Exp/(Inc) 0 24 45 0 0 18 0 0 69 0PBT after EO Income 894 931 656 753 1,094 1,036 741 1,085 3,234 3,974Tax 121 114 177 201 123 101 111 261 613 596Rate (%) 13.5 12.2 27.0 26.7 11.3 9.7 15.0 24.0 19.0 15.0Minority Int/Adj on Consol 34 16 -37 32 74 -14 0 0 45 74Reported PAT 739 801 516 520 897 949 630 824 2,576 3,304Adj PAT 739 822 549 520 897 965 630 824 2,632 3,304YoY Change (%) 26.5 16.6 12.4 33.7 21.4 17.4 14.7 58.4 406.1 25.5Margins (%) 12.9 13.5 9.5 9.2 12.8 12.8 8.8 12.2 11.3 11.6E: MOSL Estimates; Quarterly numbers don’t add up to full year numbers due to restatementNimish Desai (Nimishdesai@MotilalOswal.com); Tel: +91 22 3982540631 December 2008217

Results PreviewSECTOR: PHARMACEUTICALSCiplaSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGCIPLA INREUTERS CODECIPL.BO31 December 2008Previous Recommendation: NeutralNeutralRs187Equity Shares (m) 777.352-Week Range (Rs) 244/1461,6,12 Rel. Perf. (%) -13/17/40M.Cap. (Rs b) 145.3M.Cap. (US$ b) 3.0YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 35,706 6,766 8.7 7.3 21.5 4.5 21.0 23.9 4.1 17.703/08A 42,184 7,014 9.0 3.6 20.7 3.9 18.7 19.0 3.6 17.503/09E 51,101 7,120 9.2 1.5 20.4 3.4 16.5 16.8 3.0 13.303/10E 60,255 10,360 13.3 45.0 14.0 2.8 20.2 20.9 2.5 11.2? On a high base of last year, Cipla’s 3QFY09 topline is likely to grow by 17% led mainly by a 29% growth in exportrevenues. Domestic growth is likely to be muted at 11.4% due to high base of last year. The other operating income(including technology licensing income) is also likely to decline by 18% to Rs800m due to high base effect.? EBITDA margin is likely to decline by 260bp YoY, due to high base of 3QFY08 which, we believe, was boosted bysupplies of Alendronate Sodium under exclusivity to Teva.? The depreciation of the INR v/s the US$ is likely to result in MTM forex losses for the company as it has entered intoforward contracts worth US$400m.? PAT is likely to record 29% decline to Rs1.5b on a high base of last year and partly impacted by forex losses onforward covers.? We believe that Cipla has one of the strongest generic pipelines amongst Indian companies. It has tie-ups with 17 USbasedgeneric companies for supply of generic products. This coupled with the company’s low-risk strategy andstrong capex should ensure good long-term potential. We continue to believe that Cipla could be an acquisition targetgiven the absence of succession planning at the company. Cipla is currently valued at 20.4x FY09E and 14.0x FY10Eearnings. Maintain Neutral.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 9,018 10,984 11,045 11,221 12,071 13,547 12,920 12,657 42,268 51,195YoY Change (%) 4.4 22.6 25.4 20.4 33.9 23.3 17.0 12.8 18.4 21.1Total Expenditure 7,411 8,744 8,422 9,194 9,371 10,392 10,198 9,850 33,772 39,810EBITDA 1,607 2,240 2,623 2,027 2,701 3,155 2,722 2,807 8,497 11,385Margins (%) 17.8 20.4 23.7 18.1 22.4 23.3 21.1 22.2 20.1 22.2Depreciation 303 328 330 367 382 406 425 514 1,326 1,728Interest 8 24 38 46 37 56 50 58 116 200Other Income 185 418 242 407 -576 -876 -500 853 1,252 -1,100Profit before Tax 1,482 2,307 2,497 2,021 1,705 1,817 1,747 3,087 8,307 8,357Tax 284 401 390 227 305 303 245 318 1,302 1,170Rate (%) 19.2 17.4 15.6 11.2 17.9 16.6 14.0 10.3 15.7 14.0Reported PAT 1,198 1,906 2,107 1,795 1,400 1,514 1,502 2,769 7,005 7,187YoY Change (%) -29.7 5.7 14.2 25.4 16.9 -20.6 -28.7 54.3 3.5 2.6Margins (%) 13.3 17.4 19.1 16.0 11.6 11.2 11.6 21.9 16.6 14.0E: MOSL EstimatesNimish Desai (Nimishdesai@MotilalOswal.com); Tel: +91 22 3982540631 December 2008218

Results PreviewSECTOR: PHARMACEUTICALSDishman PharmaSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGDISH INREUTERS CODEDISH.BO31 December 2008Previous Recommendation: BuyBuyRs139Equity Shares (m) 81.652-Week Range 427/1191,6,12 Rel. Perf. (%) 0/-25/-10M.Cap. (Rs b) 11.3M.Cap. (US$ b) 0.2YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 5,750 893 11.0 94.1 12.6 3.2 35.4 15.6 2.9 14.803/08A 8,031 1,215 15.0 36.1 9.3 1.9 27.3 14.5 2.2 11.503/09E 10,447 828 10.2 -31.9 13.6 1.7 13.6 10.1 1.7 7.403/10E 12,695 1,829 22.5 120.9 6.2 1.4 25.2 17.1 1.4 6.1? Dishman’s 3QFY09 topline is likely to record 28% growth led by increased outsourcing revenues and partly due tothe recent depreciation of the INR v/s the US$. The company does not take forward covers on more than 50% ofreceivables and hence is likely to benefit from INR depreciation.? EBITDA margin is likely to expand by 330bp led by increased realizations for the MM business and lower input costs.? However, significant forex losses, higher depreciation and tax outgo will result in a 60% decline in PAT to Rs128m.? We believe that key growth drivers for Dishman will be ramped up in the India-based contracts, with supplies toSolvay expected to record 20% for CAGR for FY08-10, while non-Solvay contracts are expected to grow at 53%CAGR (albeit on a low base). We believe that Dishman will be a key beneficiary of the increased pharmaceuticaloutsourcing from India. Dishman is currently valued at 13.6x FY09E and 6.2x FY10E consolidated earnings. MaintainBuy.QUARTERLY PERFORMANCE (CONSOLIDATED)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 1,680 1,866 2,066 2,419 2,359 2,520 2,650 2,918 8,031 10,447YoY Change (%) 104.2 59.5 19.0 17.6 40.4 35.1 28.3 20.6 38.8 30.1Total Expenditure 1,406 1,461 1,667 1,968 1,696 2,022 2,052 2,242 6,502 8,011EBITDA 274 405 398 451 663 498 599 676 1,529 2,436Margins (%) 16.3 21.7 19.3 18.6 28.1 19.8 22.6 23.2 19.0 23.3Depreciation 89 111 104 167 144 139 155 160 472 599Interest 61 72 77 96 93 87 90 97 305 367Other Income 107 91 125 154 -141 -235 -210 46 477 -540PBT after EO Income 230 314 342 342 285 37 144 465 1,228 930Tax 4 32 22 12 3 17 7 20 70 47Deferred Tax 12 0 0 -69 5 -10 9 52 -57 56Rate (%) 7.0 10.3 6.4 -16.7 2.7 20.0 11.0 15.4 1.1 11.0Reported PAT 214 282 321 399 277 30 128 393 1,215 828YoY Change (%) 15.7 67.8 31.3 20.0 29.6 -89.5 -60.2 -1.3 30.8 -31.9Margins (%) 12.7 15.1 15.5 16.5 11.8 1.2 4.8 13.5 15.1 7.9E: MOSL EstimatesNimish Desai (Nimishdesai@MotilalOswal.com); Tel: +91 22 3982540631 December 2008219

Results PreviewSECTOR: PHARMACEUTICALSDivi's LaboratoriesSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGDIVI INREUTERS CODEDIVI.BO31 December 2008Previous Recommendation: BuyBuyRs1,339Equity Shares (m) 64.652-Week Range 1,930/8901,6,12 Rel. Perf. (%) 4/29/24M.Cap. (Rs b) 86.5M.Cap. (US$ b) 1.8YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 7,244 1,919 29.7 172.1 45.1 16.0 43.5 40.0 12.1 35.703/08A 10,328 3,476 53.8 81.1 24.9 10.0 49.5 47.2 8.4 21.303/09E 13,297 5,152 79.8 48.2 16.8 6.8 48.3 49.0 6.4 13.803/10E 16,695 6,507 100.8 26.3 13.3 4.8 42.4 43.6 4.8 10.8? Divi’s 3QFY09 topline is expected to grow by 31% to Rs3.72b led by increased outsourcing revenues, incrementalcontribution from Carotenoids and the recent depreciation of the INR v/s the US$. The company commissioned itsCarotenoids facility in June 2008 and we expect a gradual scale-up in revenues from this initiative over the next twoyears.? EBITDA margin is likely to expand by 820bp to 47.6% led by richer product-mix, one-time upsides from supply ofLevetiracetam API to Mylan under exclusivity and currency depreciation.? Bottomline growth is expected to be strong at 50.6% for the quarter.? We expect Divi’s to be one of the key beneficiaries of increased pharmaceutical outsourcing from India. The company’sexisting relationships with innovator companies should help it in procuring more MNC contracts. We estimate 27%revenue and 37% earnings CAGR for the FY08-10 period for Divi’s. It is currently valued at 16.8x FY09E and 13.3xFY10E earnings. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Operating Revenue 2,281 2,425 2,842 2,780 2,661 3,305 3,723 3,608 10,328 13,297YoY Change (%) 41.8 50.3 90.0 10.1 16.7 36.3 31.0 29.8 42.6 28.7Total Expenditure 1,438 1,375 1,721 1,719 1,473 1,676 1,951 2,072 6,254 7,171EBITDA 843 1,050 1,121 1,061 1,188 1,629 1,772 1,536 4,075 6,125Margins (%) 36.9 43.3 39.4 38.2 44.6 49.3 47.6 42.6 39.5 46.1Depreciation 86 78 91 102 107 119 130 155 357 512Interest 34 32 18 18 20 18 25 19 102 82Other Income 34 15 45 43 -38 0 30 77 138 69PBT 757 956 1,057 984 1,023 1,491 1,647 1,438 3,754 5,600Tax 49 1 62 82 42 101 132 173 194 448Deferred Tax 36 42 -11 39 16 26 0 -42 105 0Rate (%) 11.1 4.5 4.8 12.3 5.7 8.5 8.0 9.1 8.0 8.0Adj PAT 673 913 1,007 863 965 1,364 1,515 1,308 3,455 5,152YoY Change (%) 151.6 191.7 207.5 -14.7 43.4 49.5 50.6 51.5 80.0 49.1Margins (%) 29.5 37.6 35.4 31.0 36.3 41.3 40.7 36.2 33.5 38.7E: MOSL EstimatesNimish Desai (Nimishdesai@MotilalOswal.com); Tel: +91 22 3982540631 December 2008220

Results PreviewSECTOR: PHARMACEUTICALSSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGDR INREUTERS CODEREDY.BO31 December 2008Previous Recommendation: BuyDr Reddy's LaboratoriesBuyRs470Equity Shares (m) 168.252-Week Range (Rs) 760/3871,6,12 Rel. Perf. (%) 4/-2/16M.Cap. (Rs b) 79.0M.Cap. (US$ b) 1.6YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 65,095 9,323 55.5 521.1 8.5 1.9 22.4 14.3 1.3 5.903/08A 50,007 4,669 27.8 -50.0 16.9 1.7 9.9 4.8 1.7 12.703/09E 62,212 5,169 30.7 10.7 15.3 1.6 10.1 8.2 1.4 9.903/10E 70,461 6,882 40.9 33.1 11.5 1.4 12.3 10.3 1.2 8.2? We expect DRL’s topline to grow by 21.6% to Rs14.97b led by 20% growth in branded formulations exports, a 22%growth in US business and consolidation of acquired companies.? EBITDA margin is expected to expand by 260bp on a low base of last year as well as reflecting the positive impactof INR appreciation v/s the US$.? Other income is likely to be adversely impacted due to lower cash balance and MTM forex losses.? We expect Rs1.28b PAT for the quarter as compared to a loss of Rs851m for 3QFY08, wherein PAT was adverselyimpacted by Rs2.36b write-off related to Betapharm.? Traction in the branded formulations and CCS businesses will be the key growth drivers for DRL over next twoyears. Sourcing of products from Indian facilities for the German market will have a positive impact on the profitabilityof the company while we await further details on the AOK tender from DRL. The recent acquisition of the BASFfacility in the US is likely to help DRL participate in US government tenders and will also facilitate packaging for itsOTC business. The impact of this acquisition will be visible in FY10. We have reduced our FY10 earnings estimatesby 13% to take into account the potential margin erosion in Germany related to the AOK tender. DRL is currentlyvalued at 15.3x FY09E and 11.5x FY10E earnings. Maintain Buy.GLOBAL QUARTERLY PERFORMANCE (US GAAP)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEGross Sales 12,018 12,669 12,321 12,999 15,038 16,152 14,978 16,044 50,007 62,212YoY Change (%) -14.5 -36.8 -20.2 -16.5 25.1 27.5 21.6 23.4 -23.2 24.4EBITDA 2,132 1,461 1,383 1,725 1,815 2,326 2,069 2,002 6,701 8,212Margins (%) 17.7 11.5 11.2 13.3 12.1 14.4 13.8 12.5 13.4 13.2Depreciation & Amortization 351 410 2,740 693 391 472 400 407 4,194 1,670Other Income 231 372 129 200 166 -338 -116 -26 932 -314Profit before Tax 2,012 1,423 -1,228 1,232 1,590 1,516 1,553 1,569 3,439 6,228Tax 181 -1,248 -380 218 242 303 264 250 -1,229 1,059Rate (%) 9.0 -87.7 30.9 17.7 15.2 20.0 17.0 15.9 -35.7 17.0Reported PAT 1,831 2,671 -848 1,015 1,348 1,213 1,289 1,320 4,669 5,169Minority Interest 3 1 3 -17 0 0 0 0 -10 0Adjusted PAT 1,828 1,209 -851 1,032 1,348 1,213 1,289 1,320 4,679 5,169YoY Change (%) 34.8 -56.8 -145.3 -68.3 -26.3 0.3 - 27.8 -49.6 10.5Margins (%) 15.2 9.5 -6.9 7.9 9.0 7.5 8.6 8.2 9.4 8.3E: MOSL EstimatesNimish Desai (Nimishdesai@MotilalOswal.com); Tel: +91 22 3982540631 December 2008221

Results PreviewSECTOR: PHARMACEUTICALSGlaxoSmithKline PharmaceuticalsSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGGLXO INREUTERS CODEGLAX.BO31 December 2008Previous Recommendation: BuyBuyRs1,147Equity Shares (m) 84.752-Week Range (Rs) 1,212/8001,6,12 Rel. Perf. (%) -8/32/64M.Cap. (Rs b) 97.2M.Cap. (US$ b) 2.0YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA12/06A 15,384 3,617 42.7 18.1 26.9 8.1 30.3 46.4 5.6 17.912/07A 15,703 3,997 47.2 10.5 24.3 7.1 29.4 44.8 5.2 16.612/08E 16,677 4,515 53.3 12.9 21.5 5.9 27.5 41.5 4.8 14.612/09E 18,678 5,385 63.6 19.3 18.0 4.9 27.1 40.9 4.1 12.2? We expect GSK’s topline to grow by 9.6% to Rs3.7b led by double-digit growth in Priority Products (60-70% ofsales). DPCO products (~26% of sales) are likely to record single-digit revenue growth.? EBITDA margin is expected to expand by 70bp, while PAT is expected to grow by 10% for the quarter.? We continue to be positive about GSK’s long-term prospects. It is one of the best plays on IPR regime in India withplans to launch 9 patented/low-competition products by CY10E. We believe that the company deserves premiumvaluations due to the strong parentage (giving access to a large product pipeline), brand-building ability and its likelypositioning in the post patent era. Parent is fully committed to the listed entity, which is evident from the fact that it isproposing to launch most of the patented products through the listed entity. GSK is currently valued at 21.5x CY08Eand 18x CY09E earnings. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E DECEMBER CY07 CY08 CY07 CY08E1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QENet Sales 4,203 3,915 4,193 3,392 4,215 4,163 4,579 3,719 15,703 16,677YoY Change (%) -1.2 -3.1 5.6 8.8 0.3 6.3 9.2 9.6 2.1 6.2Total Expenditure 2,753 2,692 2,826 2,460 2,780 2,734 2,950 2,671 10,731 11,193EBITDA 1,450 1,223 1,366 932 1,435 1,429 1,629 1,048 4,972 5,484Margins (%) 34.5 31.2 32.6 27.5 34.1 34.3 35.6 28.2 31.7 32.9Depreciation 37 37 38 50 37 39 40 47 162 163Other Income 577 312 339 385 428 341 389 362 1,307 1,520PBT before EO Expense 1,990 1,498 1,667 1,261 1,826 1,731 1,978 1,363 6,112 6,841Tax 563 502 555 374 622 585 668 452 1,993 2,326Deferred Tax 10 32 22 59 -9 -2 -10 0 122 0Rate (%) 28.8 35.6 34.6 34.3 33.6 33.7 33.3 33.2 34.6 34.0Adjusted PAT 1,418 964 1,091 829 1,213 1,149 1,320 911 3,997 4,515YoY Change (%) 37.1 5.9 10.1 21.6 -14.5 19.1 21.0 9.9 10.5 12.9Margins (%) 33.7 24.6 26.0 24.4 28.8 27.6 28.8 24.5 25.5 27.1Extra-Ord Expense 0 0 -1,399 20 0 0 0 0 -1,379 0Reported PAT 1,418 964 2,490 809 1,213 1,149 1,320 911 5,377 4,515E: MOSL EstimatesNimish Desai (Nimishdesai@MotilalOswal.com); Tel: +91 22 3982540631 December 2008222

Results PreviewSECTOR: PHARMACEUTICALSSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGGNP INREUTERS CODEGLEN.BO31 December 2008Previous Recommendation: NeutralGlenmark PharmaceuticalsNeutralRs295Equity Shares (m) 248.752-Week Range (Rs) 730/2111,6,12 Rel. Perf. (%) -15/-25/2M.Cap. (Rs b) 73.4M.Cap. (US$ b) 1.5YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 12,221 1,185 4.5 431.8 65.6 10.3 17.3 10.6 6.7 19.203/08A 19,757 3,154 12.0 166.1 24.7 4.8 20.8 15.8 4.1 10.203/09E 24,218 4,134 15.7 31.1 18.8 3.6 20.3 17.9 3.4 10.703/10E 34,416 6,315 23.9 52.8 12.3 2.6 22.4 20.6 2.4 7.2? Glenmark’s 3Q topline is expected to record 29% growth (excluding NCE out-licensing revenues) led mainly bystrong double-digit growth in emerging markets. US revenues are expected to grow by 10.6% despite the one-timecontribution of Oxcarbazepine in 3QFY08.? EBITDA margin (excl. NCE upsides) is estimated to expand by 560bp to 32% led by the strong double-digit growthin emerging markets.? PAT (excl NCE upsides) is expected to grow by 6.4% despite the one-time contribution of Oxcarbazepine in 3QFY08.Adjusted for this one-off upside, PAT is expected to record 38% growth for the quarter.? Glenmark has differentiated itself amongst Indian pharmaceutical companies through its significant success in NCEresearch. It has emerged as the most successful NCE research company by out-licensing 3 molecules and receivingUS$117m in upfront and milestone payments till date. It is now trying a similar differentiated strategy in the genericsspace by focusing on complex and low-competition products for the regulated generic markets.? Glenmark is currently valued at 18.8x FY09E and 12.3x FY10E earnings. Maintain Neutral.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Income 3,514 3,749 6,794 5,727 4,608 5,609 6,447 7,707 19,783 24,218YoY Change (%) - - - - 31.2 49.6 -5.1 34.6 -67.8 22.4EBITDA 1,025 1,184 3,589 2,233 1,410 1,694 2,066 2,583 8,031 7,598Margins (%) 29.2 31.6 52.8 39.0 30.6 30.2 32.0 33.5 40.6 31.4Depreciation 143 162 169 242 215 225 250 216 716 906Interest 144 158 175 160 155 187 200 177 637 719Other Income 25 53 27 341 109 433 13 151 446 706PBT after EO Expense 763 916 3,272 2,172 1,148 1,715 1,629 2,340 7,124 6,678Tax 140 110 485 -111 678 319 309 -38 623 1,269Rate (%) 25.1 18.0 14.4 -0.8 -0.5 31.6 19.0 18.1 11.4 19.0Reported PAT 572 751 2,800 2,190 1,154 1,174 1,319 1,917 6,313 5,409Minority Interest 0 0 0 0 0 0 0 0 0 0PAT after Minority Int. 572 751 2,800 2,190 1,154 1,174 1,319 1,917 6,313 5,409YoY Change (%) - - - - 101.9 56.2 -52.9 -12.5 23.7 -14.3Margins (%) 16.3 20.0 41.2 38.2 25.0 20.9 20.5 24.9 31.9 22.3E: MOSL Estimates; Note: Financials not adjusted for R&D capitalizationNimish Desai (Nimishdesai@MotilalOswal.com); Tel: +91 22 3982540631 December 2008223

Results PreviewSECTOR: PHARMACEUTICALSSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGJOL INREUTERS CODEJUBO.BO31 December 2008Previous Recommendation: BuyJubilant OrganosysBuyRs119Equity Shares (m) 147.052-Week Range 391/1021,6,12 Rel. Perf. (%) -10/-34/-13M.Cap. (Rs b) 17.5M.Cap. (US$ b) 0.4YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 18,097 2,280 12.4 44.0 9.6 1.9 26.4 15.4 1.4 7.903/08A 24,889 4,118 22.3 80.5 5.3 1.4 38.2 17.0 1.3 7.203/09E 38,253 1,829 9.9 -55.6 12.0 1.0 12.3 7.7 1.2 5.903/10E 46,688 5,407 29.3 195.6 4.1 0.8 27.9 15.1 0.9 4.5? Jubilant’s 3QFY09 topline is expected to record 53% growth led by increased traction in the CRAMS business andconsolidation of acquired companies. Organic growth (on like-to-like basis) is likely to be 39%.? EBITDA margin is expected to decline by 40bp despite favorable currency movement due to significant increase instaff costs linked to acquired companies.? Other income will be adversely impacted due to MTM forex losses on outstanding foreign currency loans andFCCBs.? Despite strong operational performance, bottomline is expected to decline by 37% due to MTM forex losses.? Jubilant is currently valued at 12x FY09E and 4.1x FY10E consolidated earnings. It is likely to benefit from theincreased outsourcing from India due to its existing relationships with global pharmaceutical and agrochemical playersand significant ramp-up in Hollister (USA). Our revised earnings estimates take into account a favorable currency,potential of lower realizations for the chemicals business and lower other income. Maintain Buy. High leverageremains a key risk to our positive stance.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 5,400 6,183 6,416 6,890 8,266 9,405 9,833 10,749 24,889 38,253YoY Change (%) 31.3 32.7 36.7 48.7 53.1 52.1 53.3 56.0 37.5 53.7Total Expenditure 4,448 5,050 5,121 5,633 6,608 7,632 7,885 8,456 20,252 30,581EBITDA 952 1,133 1,295 1,257 1,658 1,773 1,948 2,293 4,637 7,672Margins (%) 17.6 18.3 20.2 18.2 20.1 18.8 19.8 21.3 18.6 20.1Depreciation 194 237 247 361 337 411 450 465 1,039 1,662Interest 84 109 123 21 138 221 290 328 337 976Other Income 996 385 231 -182 -1,002 -1,671 -500 382 1,430 -2,791PBT before EO Expense 1,670 1,172 1,156 693 182 -530 708 1,882 4,691 2,243Extra-Ord Expense 0 0 36 93 0 0 0 0 129 0Tax 273 76 244 -20 61 166 127 49 573 404Rate (%) 16.3 6.5 21.8 -3.3 33.6 -31.3 18.0 2.6 12.6 18.0PAT 1,397 1,096 876 620 121 -696 580 1,833 3,989 1,839Minority Interest -32 -4 -7 27 -7 -69 8 78 -16 10Adjusted PAT 1,429 1,100 911 689 128 -627 573 1,756 4,118 1,829YoY Change (%) 210.0 102.2 43.0 8.0 -91.1 -157.0 -37.1 154.8 80.6 -55.6Margins (%) 26.5 17.8 14.2 10.0 1.5 -6.7 5.8 16.3 16.5 4.8E: MOSL EstimatesNimish Desai (Nimishdesai@MotilalOswal.com); Tel: +91 22 3982540631 December 2008224

Results PreviewSECTOR: PHARMACEUTICALSSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGLPC INREUTERS CODELUPN.BO31 December 2008Previous Recommendation: BuyLupinBuyRs618Equity Shares (m) 82.152-Week Range 780/4301,6,12 Rel. Perf. (%) -1/21/50M.Cap. (Rs b) 50.7M.Cap. (US$ b) 1.0YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 20,057 2,327 26.4 23.0 23.4 5.7 31.1 20.1 2.8 19.003/08A 27,064 3,334 37.8 43.3 16.3 4.0 31.0 22.0 2.2 13.803/09E 36,251 4,385 49.7 31.5 12.4 3.2 30.4 22.5 1.7 9.303/10E 42,859 5,598 63.5 27.7 9.7 2.5 30.9 23.8 1.4 7.5? Lupin’s 3QFY09 topline is expected to record 26% growth driven mainly by consolidation of Kyowa (Japan), whichis expected to contribute about Rs1b to revenues. Organic topline growth is estimated at only 13%, impacted byincreased competition for Cefdinir in the US.? EBITDA margin is likely to expand by 120bp on a low base. EBITDA margin expansion will be constrained by lossof high-margin Cefdinir revenues and contribution from Kyowa’s low-margin business.? PAT is expected to grow by only 1.3% on high base of last year but will decline sequentially due to increasedcompetition for Ramipril and Cefdinir in the US.? Lupin is likely to witness a gradual improvement in the underlying fundamentals led by an expanding US genericspipeline, niche / Para-IV opportunities in the US, strong performance from Suprax (branded product in US) andramp-up in formulation revenues from its European initiative. Incremental benefits are likely to be visible from theJammu facility which enjoys fiscal benefits. Given the strong earnings growth, valuations at 12.4x FY09 and 9.7xFY10 EPS are attractive. Maintain Buy. Early resolution of US FDA observations is imperative. Aggravation ofthese issues is the key risk to our positive stance on the stock.QUARTERLY PERFORMANCE (CONSOLIDATED)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 5,757 6,590 7,213 7,504 8,624 9,343 9,066 9,219 27,064 36,251YoY Change (%) 14.1 34.9 42.7 41.1 49.8 41.8 25.7 22.9 34.4 33.9Total Expenditure 4,936 5,464 5,998 6,307 7,097 7,555 7,437 7,625 22,705 29,713EBITDA 821 1,126 1,215 1,197 1,527 1,788 1,629 1,594 4,358 6,538Margins (%) 14.3 17.1 16.8 16.0 17.7 19.1 18.0 17.3 16.1 18.0Depreciation 127 140 175 206 193 201 210 266 647 870Interest 89 80 101 104 102 127 160 193 374 582Other Income 159 188 1,389 328 202 13 100 150 2,065 465PBT 764 1,094 2,329 1,216 1,433 1,474 1,359 1,285 5,402 5,551Tax 206 338 520 255 313 312 285 255 1,318 1,166Rate (%) 26.9 30.9 22.3 20.9 21.8 21.2 21.0 19.9 24.4 21.0Reported PAT 558 756 1,809 961 1,120 1,162 1,074 1,030 4,084 4,385Extra-Ordinary Exp/(Inc) 0 0 -748 0 0 0 0 0 -748 0Recurring PAT 559 756 1,060 959 1,121 1,156 1,074 1,030 3,334 4,385YoY Change (%) 4.4 45.9 70.9 47.0 100.6 52.9 1.3 7.4 43.3 31.5Margins (%) 9.7 11.5 14.7 12.8 13.0 12.4 11.8 11.2 12.3 12.1E: MOSL EstimatesNimish Desai (Nimishdesai@MotilalOswal.com); Tel: +91 22 3982540631 December 2008225

Results PreviewSECTOR: PHARMACEUTICALSSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGPIHC INREUTERS CODENICH.BO31 December 2008Previous Recommendation: BuyPiramal HealthcareBuyRs239Equity Shares (m) 209.052-Week Range 389/1801,6,12 Rel. Perf. (%) 7/8/19M.Cap. (Rs b) 49.9M.Cap. (US$ b) 1.0YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 24,202 2,319 11.0 85.4 21.7 4.8 23.1 19.8 2.3 16.803/08A 28,728 3,643 17.4 58.9 13.7 4.6 34.0 25.6 2.0 10.403/09E 34,101 3,919 18.8 7.6 12.7 3.7 32.3 24.0 1.7 8.403/10E 39,479 5,423 25.9 38.3 9.2 2.9 35.5 26.2 1.4 6.8? PHL’s 3QFY09 topline is expected to grow by 18% to Rs8.65b led mainly by double-digit growth for the domesticformulations business and ramp-up in CRAMS revenues from India.? EBITDA margin is expected to expand by 340bp on low base of last year. Adjusted for the NCE research spend,EBITDA margin is expected to be flat for the quarter.? MTM forex losses on forward contracts are likely to adversely impact other income for the quarter.? PAT is expected to grow by 25% for the quarter. Adjusted for NCE research spend, PAT growth is likely to be flat.? The macro environment for CRAMS business remains favorable given India’s inherent cost advantages and chemistryskills. We believe that PHL will be a key beneficiary of the increased outsourcing from India, given the strong MNCrelations which the company enjoys. We believe that PHL’s CRAMS business is gaining increased traction withmore products being added to its portfolio. PHL's domestic formulations business is expected to grow 11-12% for thenext two years. Turnaround of the proposed acquisition of Minrad operations will be imperative for maintainingearnings growth for FY10. PHL is currently valued at 12.7x FY09E and 9.2x FY10E earnings excluding the impactof the Minrad acquisition. Maintain Buy.QUARTERLY PERFORMANCE31 December 2008(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 6,081 7,566 7,323 7,759 7,083 8,893 8,650 9,475 28,729 34,101YoY Change (%) 16.4 15.6 12.8 20.3 16.5 17.5 18.1 22.1 16.2 18.7Total Expenditure 5,288 6,317 6,112 5,643 5,680 7,066 6,931 7,496 23,311 27,172EBITDA 793 1,249 1,212 2,116 1,403 1,827 1,720 1,979 5,418 6,929Margins (%) 13.0 16.5 16.5 27.3 19.8 20.5 19.9 20.9 18.9 20.3Depreciation 249 263 269 166 270 288 320 364 947 1,242Interest 111 111 122 119 120 170 180 187 463 657Other Income 68 80 40 -128 -207 -408 -100 188 61 -528PBT before EO Expense 500 955 861 1,704 806 960 1,120 1,617 4,068 4,502Extra-Ord Expense 3 27 56 253 41 96 0 0 339 136PBT after EO Expense 497 928 805 1,451 766 864 1,120 1,617 3,729 4,366Tax 18 127 79 153 87 114 103 97 377 401Deferred Tax 45 -47 0 2 0 0 40 105 0 145Rate (%) 12.7 8.6 9.8 10.7 11.3 13.2 12.8 12.5 10.1 12.5PAT 434 848 726 1,296 679 750 977 1,414 3,352 3,820Less: Minority Interest 0 0 -1 15 -2 17 1 4 14 20Reported PAT 434 848 728 1,281 681 733 976 1,411 3,338 3,800Adj PAT 437 872 778 1,507 717 816 976 1,411 3,643 3,919YoY Change (%) -18.8 33.3 40.5 145.1 63.9 -6.4 25.4 -6.4 53.5 7.6E: MOSL Estimates; Quarterly numbers don’t add up to full year numbers due to restatementNimish Desai (Nimishdesai@MotilalOswal.com); Tel: +91 22 39825406226

Results PreviewSECTOR: PHARMACEUTICALSSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGRBXY INREUTERS CODERANB.BO31 December 2008Previous Recommendation: NeutralRanbaxy LaboratoriesNeutralRs252Equity Shares (m) 372.752-Week Range (Rs) 614/1641,6,12 Rel. Perf. (%) 15/-23/12M.Cap. (Rs b) 94.1M.Cap. (US$ b) 1.9YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END* (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA12/06A 61,377 5,103 12.8 135.8 19.8 3.7 19.9 11.4 2.1 14.812/07A 69,756 5,325 13.3 4.2 19.0 3.4 19.1 11.7 1.9 14.312/08E 75,240 3,949 8.8 -33.5 28.5 1.8 6.6 6.7 1.3 10.312/09E 80,353 5,017 11.2 27.0 22.5 1.7 8.0 7.6 1.2 9.9* Excludes upsides from FTF products? Despite a favorable currency, Ranbaxy’s 4Q topline is expected to record only 7.5% growth due to the ongoing USFDA ban on some products as well as significant forward covers taken in the past.? EBITDA margin is expected to decline by 560bp mainly due to the impact of the US FDA ban and forex losses onhedged positions.? We expect MTM forex losses of about Rs1.58b linked to outstanding foreign currency loans (including FCCBs)compared to a gain of Rs109m in 4QCY08, thus adversely impacting other income.? We expect the company to report a net loss of Rs1b while adjusted PAT is expected to decline by 55% to Rs770mdue to the ongoing US FDA issues.? Ranbaxy is currently valued at 22.5x CY09E core earnings. We value Ranbaxy’s Para-IV pipeline at Rs109/share onfully diluted equity. We believe that further clarity on Daiichi’s strategic intent behind acquiring Ranbaxy and on thepotential for further value creation is unlikely to come through in the near future. Any synergies from the combinationof the two companies would be visible only in the long term. The US FDA problems will continue to impact near-termearnings till the company is able to resolve them or alternatively acquire a US FDA facility. Maintain Neutral.QUARTERLY PERFORMANCE(RS MILLION)Y/E DECEMBER CY07 CY08 CY07 CY08E1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QENet Income 15,821 16,853 17,746 19,007 16,986 19,286 18,532 20,436 69,427 75,240YoY Change (%) 22.4 15.7 10.3 7.0 7.4 14.4 4.4 7.5 13.2 8.4EBITDA 1,908 2,265 2,847 2,961 2,552 3,261 1,440 2,038 9,981 9,291Margins (%) 12.1 13.4 16.0 15.6 15.0 16.9 7.8 10.0 14.4 12.3Depreciation 557 565 613 493 621 672 643 713 2,228 2,649Interest 313 351 394 385 384 465 595 400 1,443 1,844Other Income 604 2,051 543 196 -713 -1,832 -3,069 -1,513 3,394 -7,127PBT before EO Expense 1,642 3,400 2,383 2,279 834 292 -2,867 -588 9,704 -2,329Extra-Ord Expense 0 0 -223 -44 -895 0 2,441 559 -267 2,105PBT after EO Expense 1,642 3,400 2,606 2,323 1,729 292 -5,308 -1,147 9,971 -4,434Tax 355 738 516 461 361 63 -1,363 -61 2,070 -1,000Rate (%) 21.6 21.7 19.8 19.8 20.9 21.6 25.7 5.3 20.8 22.6Reported PAT 1,287 2,662 2,090 1,862 1,368 229 -3,945 -1,086 7,901 -3,434Minority Interest 11 27 0 0 0 0 0 0 38 0Adj PAT after Minority Int. 842 1,065 1,494 1,709 1,264 1,722 194 770 5,110 3,949YoY Change (%) 18.0 -12.1 -4.9 -6.7 50.1 61.7 -87.0 -55.0 0.1 -22.7Margins (%) 5.3 6.3 8.4 9.0 7.4 8.9 1.0 3.8 7.4 5.2E: MOSL EstimatesNimish Desai (Nimishdesai@MotilalOswal.com); Tel: +91 22 3982540631 December 2008227

Results PreviewSECTOR: PHARMACEUTICALSSun Pharmaceuticals IndustriesSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGSUNP INREUTERS CODESUN.BO31 December 2008Previous Recommendation: BuyBuyRs1,065Equity Shares (m) 193.452-Week Range 1,558/8901,6,12 Rel. Perf. (%) -8/5/40M.Cap. (Rs b) 206.0M.Cap. (US$ b) 4.2YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/08A 32,909 14,869 71.8 89.6 14.8 4.4 38.3 35.6 5.7 12.103/09E 33,525 10,808 52.2 -27.3 20.4 3.7 19.9 21.9 5.4 16.203/09E* 42,953 18,050 87.1 21.403/10E 39,471 13,231 63.9 22.4 16.7 3.2 20.6 22.4 4.4 13.003/10E* 42,819 13,284 64.1 -26.4* Includes Para-IV upsides? Sun Pharma’s 3QFY09 topline is expected to grow by 39% to Rs10.9b led mainly by Para-IV upsides from genericProtonix (we estimate revenue contribution at Rs2b). Excluding patent challenge upsides, topline is expected to growby 14% to Rs9b on a high base of last year.? EBITDA margin is expected to decline by 170bp to 43.2% led mainly due to high base of last year.? PAT is likely to grow by 45% boosted by patent challenges and higher other income. Excluding patent challengeupsides, PAT is expected to record 19% growth to Rs3.2b.? An expanding generic portfolio coupled with change in product mix in favor of high-margin exports is likely to bringin long-term benefits for SPIL. Its ability to sustain high growth rates at superior margins even on a high base is aclear positive. With the domestic business progressing well and increasing traction on the US front (both in Caracoand from India), the possibility of a rapid scale-up over the next couple of years is high. Key drivers for future includeramp-up in US, the expected value unlocking by leveraging acquired companies (Able Labs & Valeant) and monetizationof the Para-IV pipeline. SPIL is currently valued at 20.4x FY09E and 16.7x FY10E earnings (excl. Para-IV upsideswhich have a DCF value of Rs35/share). Maintain Buy. Further aggravation of US FDA problems at Caraco is thekey risk to our positive stance.QUARTERLY PERFORMANCE (CONSOLIDATED)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Revenues 6,153 6,465 7,902 12,389 10,239 11,778 10,964 9,972 32,909 42,953YoY Change (%) 23.4 23.4 50.1 133.2 66.4 82.2 38.7 -19.5 58.3 30.5EBITDA 2,148 2,409 3,547 7,407 5,379 5,379 4,740 3,201 15,511 18,700Margins (%) 34.9 37.3 44.9 59.8 52.5 45.7 43.2 32.1 47.1 43.5Depreciation 226 230 245 268 277 287 295 303 969 1,161Net Other Income 606 111 179 556 451 524 608 852 1,451 2,434PBT 2,528 2,290 3,481 7,695 5,554 5,616 5,053 3,750 15,994 19,974Tax 98 1 116 270 299 288 253 172 485 1,012Rate (%) 3.9 0.0 3.3 3.5 5.4 5.1 5.0 4.6 3.0 5.1Profit after Tax 2,430 2,289 3,365 7,425 5,255 5,329 4,800 3,578 15,509 18,962Share of Minority Partner 158 104 181 197 261 223 210 218 640 912Adj Net Profit 2,272 2,185 3,184 7,228 4,994 5,106 4,590 3,360 14,869 18,050YoY Change (%) 28.6 17.2 60.1 240.8 119.8 133.6 44.2 -53.5 92.1 21.4Margins (%) 36.9 33.8 40.3 58.3 48.8 43.4 41.9 33.7 45.2 42.0E: MOSL Estimates; Quaterly results have been recasted and hence do not tally with full year resultsNimish Desai (Nimishdesai@MotilalOswal.com); Tel: +91 22 3982540631 December 2008228

Results PreviewSECTOR: PHARMACEUTICALSSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGWOCK INREUTERS CODEWCKH.BO31 December 2008Previous Recommendation: NeutralWockhardtNeutralRs108Equity Shares (m) 109.452-Week Range 439/891,6,12 Rel. Perf. (%) 10/-13/-22M.Cap. (Rs b) 11.8M.Cap. (US$ b) 0.244YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA12/06A 17,290 2,558 23.4 -0.5 4.6 1.1 27.2 15.0 1.3 5.512/07A 26,531 3,460 31.6 35.3 3.4 0.9 29.6 15.9 1.4 5.812/08E 35,713 2,247 20.5 -35.0 5.3 0.8 16.2 13.7 1.2 5.212/09E 41,847 3,698 33.8 64.6 3.2 0.7 22.4 17.3 1.0 4.4? Wockhardt’s 4QCY08 topline is likely to grow by 22% to Rs9.2b led by double-digit growth in emerging markets andconsolidation of the Morton Grove acquisition. Organic growth is expected to be 16.4%.? EBITDA margin is expected to decline 320bp due to consolidation of Morton Grove with Wockhardt’s operations.? PAT adjusted for R&D capitalization is likely to decline by 51% to Rs488m impacted by lower EBITDA margin andforex losses.? We believe that Wockhardt still has to display the ability to fully leverage its assets (particularly the biotech facilities)and scale up substantially in regulated markets, for a further re-rating in its valuation multiples. The FCCB redemptionof US$150m (in Oct-2009) will continue to be an overhang on valuations of the company (current market capitalizationis US$232m) as the company will have to raise funds either through equity dilution of through asset sales. Wockhardtis currently valued at 3.2x CY09E (without accounting for potential equity dilutions/asset sales). We believe thatearnings CAGR for CY07-09, adjusted for R&D capitalization, is likely to be in single-digits. Maintain Neutral.QUARTERLY PERFORMANCE (CONSOLIDATED )(RS MILLION)Y/E DECEMBER CY07 CY08 CY07 CY08E1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QEGross Sales 5,228 6,303 7,381 7,620 7,857 9,350 9,235 9,271 26,531 35,713YoY Change (%) 48.7 52.7 68.6 44.7 50.3 48.3 25.1 21.7 53.4 34.6Total Expenditure 4,069 4,781 5,572 5,720 6,120 7,042 7,127 7,255 20,142 27,545EBITDA 1,159 1,522 1,809 1,900 1,737 2,308 2,108 2,016 6,389 8,169Margins (%) 22.2 24.1 24.5 24.9 22.1 24.7 22.8 21.7 24.1 22.9Depreciation 181 172 196 236 241 252 269 368 785 1,129Interest 129 85 268 492 565 880 486 563 974 2,494Other Income 22 25 26 37 -234 126 -518 -348 110 -974PBT after EO Items 871 1,290 1,371 1,209 697 1,302 835 737 4,740 3,571Tax 208 266 288 155 205 261 242 42 917 750Rate (%) 23.9 20.6 21.0 12.8 29.4 20.0 29.0 5.7 19.3 21.0Minority Interest 17 29 33Reported PAT 663 1,024 1,083 1,055 509 1,041 622 695 3,857 2,821R&D Capitalized 180 170 180 118 240 228 240 292 648 1,000Adjusted PAT 552 870 972 997 345 901 446 488 3,459 2,247YoY Change (%) 1.8 37.2 53.0 29.2 -37.6 3.6 -54.2 -51.0 35.2 -35.0Margins (%) 10.6 13.8 13.2 13.1 4.4 9.6 4.8 5.3 13.0 6.3E: MOSL Estimates; Quarterly numbers don’t add up to annual numbers due to re-classificationNimish Desai (Nimishdesai@MotilalOswal.com); Tel: +91 22 3982540631 December 2008229

Results PreviewQUARTER ENDING DECEMBER 2008Real EstateBSE Sensex: 9,647 S&P CNX: 2,959 31 December 2008COMPANY NAMEDLFUnitech3QFY09 – festive demand fails to materialize3QFY09 was a disappointing quarter for the real estate industry on account of global anddomestic issues. Historically, 3Q is one of the most important quarters for the real estatesector as it coincides with the festive period. Home buyers in India typically time their bigticket purchases such as apartments around the festive period, which is supposed to beauspicious. Even prior to 3QFY09, transactions in the real estate sector had slowed downconsiderably. As such, most developers were eagerly waiting for some signs of revival inthe sector, which failed to transpire. Consequently, most RE companies, altered their launchplans and recalibrated their development plans.Government’s stimulus package to provide some reliefAt a time when the RE industry is faced with severe liquidity crunch, RBI has introducedmeasures such as according priority sector lending status to low-value loans, restructuringof loans taken for commercial property, and reduction in excise duty on input materials likesteel and cement. RBI’s move to allow banks to provide special treatment to RE companiesis likely to result in long-term benefits. Further, the interest rate cut on housing loans of upto Rs0.2m is likely to improve buyer sentiment and help revive demand. However, as veryfew developers have offerings in the range of Rs0.05m-0.2m/unit, the rate cut measureappears solely as a sentiment booster.Real estate demand hit by weak sentiment: Real estate demand in the residentialvertical has been adversely hit by weak sentiment, low affordability, and high mortgagerates. Currently, buyers are shying away from new projects or under construction projects,where project delivery is more than a year away. This is because: (1) buyers feel thatprices could fall further in the medium term, and (2) they lack confidence in the developersand their ability to construct and deliver the project on time. As a result, the pre-salesmodel, which effectively allowed developers to finance construction cost from customeradvances, is under threat.EXPECTED QUARTERLY PERFORMANCE SUMMARYRECO SALES EBITDA NET PROFIT(RS MILLION)DEC.08 CHG. (%) DEC.08 CHG. (%) DEC.08 CHG. (%)Real EstateDLF Buy 32,481 -9.7 18,027 -27.9 13,913 -35.1Unitech Neutral 8,793 -23.0 4,133 -43.7 2,004 -61.7Sector Aggregate 41,274 -12.9 22,160 -31.5 15,918 -40.3Siddharth Bothra (SBothra@MotilalOswal.com)/Satyam Agarwal (AgarwalS@MotilalOswal.com)/ Mansi Trivedi (Mansi.Trivedi@MotilalOswal.com)31 December 2008230

Real EstateABSORPTION LAGGING SUPPLY ACROSS TOP 7 CITIES10.0Supply 1H08Absorption 1H087.55.02.50.0NCR Mumbai Pune Kolkata Hyderabad Bangalore ChennaiSource: Cushman & WakefieldList prices have little meaning: The list prices quoted by developers for underconstruction projects or newly launched projects have little meaning today, as very fewdeals are concluded at the official list prices. Invariably, deals are happening at 30-50%discount to list prices. However, developers are not officially lowering list prices, as theybelieve that taking such measures may not necessarily result in any incremental demandfrom home buyers, which has been impacted due to the negative outlook on prices andweak sentiments. In contrast, several major developers in Mumbai like Orbit Corporation,Heeranandani Constructions, Kalpatru, Neelkanth Group, Ekta Shelters and Runwal Grouphave already resorted to officially lowering list prices.Commercial and retail verticals to witness high vacancy in CY09 and CY10The commercial and retail verticals are likely to witness high vacancy in the near future,due to slowdown in growth industries such as IT/ITES and BFSI. As per industry experts,vacancy rates are likely to increase to 15-20% by CY09 and CY10 across key Tier 1 andTier 2 cities. Further, the retail vertical is also likely to face headwinds on account of hugedemand-supply imbalance. Huge supply in all key Tier 1 cities could force developers topostpone, convert or shelve projects. Balance of power in the retail vertical has shiftedtotally to the occupiers, which is likely to result in substantial rental correction in the mediumterm. As per Industry experts, outlook on retail vertical is so weak that retailers even inexisting projects are demanding rental re-negotiation or cancellation of rental agreements.Vacancy rates in the retail vertical are expected to increase to 20-25% across Tier 1 andTier 2 cities by CY09 and CY10.31 December 2008231

Real EstateHUGE FUTURE SUPPLY AND SOFTENING DEMAND TO PUSH VACANCY RATES IN 2009100Annual supply (msf) Net absorption (msf) Vacancy rates (%)207550Pan India grade A officevacancies to rise from 5% in2007 to 17% in 2009151025502004 2005 2006 2007 2008F 2009F 2010F0Source: Real Estate Intelligence Service/JLLMVACANCY ACROSS CITIES IS EXPECTED TO RISE IN 2009 AND 201040Annual supply (msf) Net absorption (msf) Vacancy rates (%)403020Vacancy likely toincrease sharply in2009 and 20103020101002004 2005 2006 2007 2008F 2009F 2010F0Source: Real Estate Intelligence Service/JLLMFunding continues to be a constraintAvailability of institutional funding, which was the key growth catalyst for the real estatesector in India over the last two to three years has slowed down considerably. This is likelyto exert severe pressure on companies with high leverage, high land cost outstanding andland bank with low near-term monetization prospects. However, this would also presenthuge opportunity to large developers with robust/healthy financials to acquire distressedassets.31 December 2008232

Real EstateTREND IN LENDING TO RE SECTOR (%)7569Growth in lending to RE sectorGrowth in loan o/s to RE sector504138250-25FY07(8)FY08Source: RBITREND IN FDI INFLOW IN HOUSING AND REAL ESTATE SECTOR (RS M)60FDI in first two monthsof 2QFY09 = 50% ofFDI inflow in FY084530150FY06 FY07 FY08 FY09Source: Cushman/ WakefieldSHARP DECLINE IN TICKET SIZE OF PE DEALS (RS B)80604020Tier I Tier II Tier IIIPE investors cautious ofinvestments in tier III cities30241812No of Deals04QFY07 1QFY08 2QFY08 Mid Aug-086Source: Cushman/ WakefieldUnfavorable real estate and financial market conditions have coincided with a sharp increasein the scale and size of projects executed and planned over the past two years. As a result,many builders— mainly small and medium-sized ones — are operationally stretched, besidesbeing financially leveraged. Therefore companies with adverse leverage ratios and significantnear-term bullet repayment obligations may be worst hit.31 December 2008233

Real EstateSTRAIN ON FINANCIALSNET DEBT EQUITY (X)3.82.51.3Average net debt/equity of 1.1x for keyRE companies0.6 0.60.9 0.91.31.82.13.40.0-1.3-0.4IBREL-0.1MLLDLFPuravankaraHDILPasrvnathOmaxeSobhaUnitechBombayDyeingNET DEBT EQUITY INCLUDING LAND COST OUTSTANDING3.82.51.3Average net debt/equity includingland cost outstanding increases to1.4x for key RE companies0.8 0.9 0.91.5 1.72.53.03.40.00.0-1.3-0.3IBRELMLLDLFPuravankaraHDILPasrvnathDEBT DUE FOR REPAYMENT BY MARCH 2009 (RS B)160147DebtDue over next 6months120801004022283921 22 196 4 6 9 8 30DLFUnitechHDILParsvnathOmaxeSobhaPuravankaraOmaxeSobhaUnitechBombayDyeing~26% of the total debt for key REcompanies is due for repayment byMarch 2009Source: MOSL31 December 2008234

Real EstateLIQUIDITY HAS DRIED UP CONSIDERABLY FOR THE DEVELOPERSTremendous increasein project sizeExpansion plans of RealEstate DevelopersMoney Guzzling SEZ’sIncreased funding requirementLocalDebtForeignTradeIPO &QIPForeignListingREMF/ REIT/ REFundsIncreased RBIintervention tocurb domesticlendingRestriction onECB’sWeak marketsentimentleading todepressedvaluationsSub-primemeltdownleading to creditcrunchReforms havebeen very slowSource: MOSLDevelopers shift focus to affordable housingPost the hype of mid-income housing, developers are now talking of affordable housing.However, defining ‘affordable housing’ continues to remain a challenge. Apart fromgovernment bodies, major PE players and developers have announced plans to tap thissegment. However, industry experts believe that one would have to adopt a wait-andwatch policy to note the success of these affordable housing projects.AFFORDABLE HOUSING IS A WIN-WIN SITUATION FOR DEVELOPERS AND HOME BUYERSAffordable HousingDeveloperWin - Win Situation? Affordability Factor? Assured Sales? High Volumes? Upfront Payment? No SpeculatorsHome BuyerSource: FICCI presentation/MOSL31 December 2008235

Real EstateCrisil’s sector outlookCrisil in its latest report expects residential capital values across its sample of 51 micromarkets to fall by an average of 17% over the next 18 months. As per Crisil’s estimates,the 10 micro-markets that are expected to witness the sharpest fall would collectivelyaccount for 40% of the total supply and would register an average decline of 27%, whereasthe 10 micro-markets that are expected to witness lowest fall would jointly account for6% of the total supply and would post an average decrease of 3%.CRISIL RE OUTLOOK OVER NEXT 18 MONTHS: FALL TO BE SHARPEST IN MUMBAI AND NCR, MILDEST IN HYDERABADHIGHEST FALL IN RESIDENTIAL CAPITAL VALUES LOWEST FALL IN RESIDENTIAL CAPITAL VALUESREGION CITY AREAS INCLUDED REGION CITY AREAS INCLUDEDDowntown western suburb Mumbai Bhayander, Vasai Road, In and around Bangalore MG Road, Brigade Road,Nallasopara and Virar MG Road Brunton Road, LavelleRoad, Richmond RoadDowntown central suburb Mumbai Dombivili, Kalyan & Vasant Kunj- NCR Vasant KunjAmbernathSouth DelhiNoida NCR Around CBD Kochi Marine Drive, MG Road,in KochiBanargee RoadHinjewadi Pune Baner, Aundh, Pashan Shamshabad Hyderabad Shamshabad& HinjewadiGhaziabad NCR Chanakyapuri- NCR ChanakyapuriSouth DelhiGurgaon -Sohan Road NCR In and around Hyderabad Banjara Hills, Jubilee HillsBanjara HillsCentral suburb Mumbai Chembur, Ghatkopar, Central Chennai Chennai Adyar, Saidapet, R K PuramMulund, Thane & VikhroliIn and around Whitefield Bangalore Whitefield, Marathalli, In and around Bangalore RMV Extension, Sadashivnagar,Sarjapur, OMR Malleshwaram Malleshwaram, Cox town,Frazer town, JayamahalGurgaon-Golf Course/DLF City NCR In and around Hyderabad Medchal, Shameerpet,ShameerpetKompallyFaridabad NCR Securenderabad Hyderabad Sainikpuri, MaredpallyCantonmentSource: Crisil Research 2008Outlook and viewWe expect FY09 to be a year of consolidation, in which industry leaders would bedifferentiated from peers. We believe developers with staying power would utilize thisconsolidation phase to emerge stronger and position themselves in an advantageous mannerto capitalize on the growth phase post consolidation. Focus on companies with: (1) highvisibility on monetization of assets over the next 3-5 years, (2) low leverage and robustfinancials, and (3) strong execution track record. Our top picks: DLF among the largecaps, and IBREL, Mahindra Lifespaces and Bombay Dyeing among midcaps.31 December 2008236

Real EstateVALUATION SUMMARYCOMPANY RECO MKT CAP (RS B) NAV (RS) CMP (RS) DISC TO NAV (%)DLF Buy 485.4 361 282 -22.0Unitech Neutral 65.9 82 41 -50.7IBREL Buy 33.6 231 131 -43.2HDIL Neutral 35.8 253 130 -48.7MLL Buy 7.3 626 178 -71.5Puravankara Buy 10.5 115 49 -57.3Bombay Dyeing Buy 7.8 527 193 -63.4Ganesh Housing Under Review 1.7 100 53 -47.5Source: MOSLRE NAVS ACROSS COMPANIES (RS/SHARE)PARTICULARS DLF UNITECH IBREL HDIL MAHINDRA PURA- BOMBAYLIFESAPCES VANKARA DYEINGApartments 191 72 74 121 164 219 72Villas 14 46 0 0 0 0 0Plots/Inst Plots 41 9 0 0 0 0 0Commercial 188 70 110 107 0 9 797Hotels 21 34 0 0 0 0 0Retail 99 14 37 136 0 0 0Others** 7 14 35 231 386 0 0Total 540 258 255 595 550 229 870Add: Misc ## 61 18 0 0 0 0 37Total 601 276 255 595 550 229 907Less: Tax 119 63 57 141 0 48 183Add: Cash 12 9 67 16 90 2 0Less: Debt 71 53 44 145 0 34 123Less: Land Cost 19 18 53 20 0 13 0Less: Operating Exp 49 23 26 51 0 21 74Net Asset Value 361 82 231 253 626 115 527CMP (Rs/sh) 282 41 131 130 178 49 193% Pre/ Disc -22.0 -50.7 -43.2 -48.7 -71.5 -57.3 -63.4## Bombay Dyeing, Rs37 for textiles business Source: MOSL31 December 2008237

Real EstateStock performance and valuationsSTOCK PERFORMANCE (%)ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARReal EstateDLF -20 -74 5 -21 11 -43Unitech -65 -92 -40 -39 -34 -61RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)120SensexMOSL Real Estate Index110MOSL Real Estate IndexSensex100858060603540Sep-08 Oct-08 Nov-08 Dec-0810Dec-07 Mar-08 Jun-08 Sep-08 Dec-08COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EReal EstateDLF 282 Buy 45.8 38.7 34.0 6.2 7.3 8.3 6.0 7.4 7.3 39.7 26.3 20.6Unitech 41 Neutral 10.2 7.4 6.4 4.0 5.5 6.3 6.2 7.0 7.2 46.1 29.2 23.3Sector Aggregate 5.8 7.0 8.0 6.1 7.3 7.3 40.7 26.7 21.0UR: Under Review31 December 2008238

Results PreviewSECTOR: REAL ESTATESTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGDLFU INREUTERS CODEDLF.BO31 December 2008Previous Recommendation: BuyDLFBuyRs282Equity Shares (m) 1,722.052-Week Range 1,225/1581,6,12 Rel. Perf. (%) 36/-1/-21M.Cap. (Rs b) 485.4M.Cap. (US$ b) 10.0YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 26,374 19,316 12.6 -27.2 22.3 12.1 54.3 30.6 21.8 38.63/08A 144,375 78,120 45.8 262.8 6.2 2.4 39.7 43.0 4.0 6.03/09E 144,360 66,717 38.7 -15.5 7.3 1.9 26.3 23.2 4.2 7.33/10E 140,465 58,624 34.0 -12.1 8.3 1.7 20.6 19.8 4.0 7.2? For 3QFY09, we expect DLF’s revenue to decline 9.7% YoY to Rs32.4b and net profit to decline 35% YoY toRs13.9b. We estimate EBITDA margin to stand at 55.5% in 3QFY09 mainly owing to increased contribution frommid-income housing segment.? Considering the slump in the RE sector, DLF has revised its development strategy with a focus on the completion ofexiting and pre-leased/committed projects. Further, it has revised its launch plans downwards to ~15msf v/s ~35msfguided earlier. DLF could end up delivering ~15msf (completed 7msf YTD) as against the delivery guidance of22msf.? DLF Assets (DAL) is close to finalizing fund raising of ~US$450m, which could get announced around January 2009.This would lower DLF’s receivables and improve its liquidity.? During 3QFY09, DLF launched mid-income housing in Bangalore, Cochin and Gurgaon (cumulative area stood at~4msf, launched in phases).? It expects to launch 6-7msf of projects in 2HFY09, which would include key projects such as Sriram Mills in Delhi,Punchkula, Bangalore, Hyderabad and Indore.? Our FY10 NAV for DLF is Rs361/sh. The residential vertical accounts for 42% of the GAV, commercial verticalaccounts for ~32% of GAV, and the retail vertical accounts for ~17% of the GAV. We view DLF as the bestmanaged RE Company in India with a robust business model. Maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 30,738 32,499 35,984 43,065 38,106 37,444 32,481 36,329 142,287 144,360Change (%) - - - - 24.0 15.2 -9.7 -15.6 440.1 1.5Total Expenditure 8,699 9,863 10,970 15,236 14,661 15,274 14,454 17,639 44,768 62,027EBITDA 22,039 22,637 25,014 27,829 23,445 22,170 18,027 18,690 97,518 82,333% Change - - - - 6.4 -2.1 -27.9 -32.8 556.0 -15.6As % of Sales 71.7 69.7 69.5 64.6 61.5 59.2 55.5 51.4 68.5 57.0Depreciation 166 110 148 362 546 505 499 447 785 1,998Interest 1,077 36 788 1,079 541 469 1,031 1,181 2,980 3,222Other Income 472 993 528 658 357 958 441 449 2,652 2,204PBT 21,268 23,484 24,606 27,048 22,715 22,154 16,937 17,511 96,405 79,317Tax 6,037 3,301 3,218 4,978 3,766 2,813 3,024 2,997 17,534 12,600Effective Tax Rate (%) 28.4 14.1 13.1 18.4 16.6 12.7 17.9 17.1 18.2 15.9Reported PAT 15,231 20,182 21,389 22,070 18,949 19,341 13,913 14,513 78,120 66,717Adj. PAT 15,155 20,185 21,450 21,769 18,640 19,354 13,913 14,513 78,108 66,396Change (%) - - - - 23.0 -4.1 -35.1 -33.3 303.3 -15.0E: MOSL Estimates; Comparable quarterly numbers are not available, as 1QFY08 is the first quarter post listingSiddharth Bothra (Sbothra@MotilalOswal.com)/Satyam Agarwal (Agarwals@MotilalOswal.com)/ Mansi Trivedi (Mansi.Trivedi@MotilalOswal.com)31 December 2008239

Results PreviewSECTOR: REAL ESTATESTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGUT INREUTERS CODEUNTE.BO31 December 2008Previous Recommendation: NeutralUnitechNeutralRs41Equity Shares (m) 1,623.452-Week Range 547/271,6,12 Rel. Perf. (%) -32/-43/-40M.Cap. (Rs b) 65.9M.Cap. (US$ b) 1.4YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 32,898 13,055 8.0 1,841.9 5.0 1.7 65.5 42.4 2.9 5.33/08A 41,152 16,692 10.2 27.2 4.0 1.8 46.1 21.5 3.3 6.23/09E 38,229 12,010 7.4 -27.7 5.5 1.6 29.2 15.5 3.7 7.03/10E 47,265 10,420 6.4 -13.2 6.3 1.5 23.3 15.7 3.0 7.2? For 3QFY09, we expect Unitech's revenue to decline 23% YoY to Rs8.8b and net profit to decline 61.7% YoY toRs2b. We estimate EBITDA margin at 47%.? In October 2009, Unitech sold 60% stake in its 100% subsidiary Unitech Wireless (UW). As per the agreementTelenor will invest Rs61b (US$1.2b) to subscribe to new shares in UW, which values UW at an EV of Rs116b(US$2.4b).? Further, Unitech plans to raise ~Rs24b by March 2009 through a combination of i) asset sale (~Rs12b) and ii) PEinflows (Rs12-13b).? It is in advanced talks to sell key assets worth ~Rs12b, which include i) corporate office at Saket and ii) six hotelproperties. It is also planning to raise Rs12-13b via PE fund raising in various projects at SPV level.? The management has indicated that they plan to postpone the commercial and retail developments, as the end userdemand has dried up.? Our FY10 NAV for Unitech is Rs82/sh. The residential vertical accounts for 46% of GAV and the commercialvertical accounts for 26% of GAV, while the retail and hotel projects account for 5% and 12% of GAV respectively.Our rating on the stock is Neutral.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 8,656 10,135 11,421 11,600 10,317 9,831 8,793 9,289 41,404 38,229Change (%) 223.3 135.4 13.9 36.7 19.2 -3.0 -23.0 -19.9 24.8 -7.7Total Expenditure 3,651 5,064 4,077 6,782 4,233 3,739 4,660 5,413 19,114 18,045EBITDA 5,005 5,071 7,344 4,818 6,084 6,092 4,133 3,876 22,290 20,185Change (%) 558.6 259.5 5.7 -5.5 21.5 20.2 -43.7 -19.5 9.7 -9.4As of % Sales 57.8 50.0 64.3 41.5 59.0 62.0 47.0 41.7 53.8 52.8Depreciation 32 30 55 89 68 38 63 81 205 250Interest 601 790 980 434 1,079 1,341 1,127 962 2,804 4,510Other Income 341 508 230 115 227 184 160 82 1,397 652PBT 4,714 4,759 6,539 4,666 5,160 4,896 3,102 2,915 20,678 16,077Tax 1,044 660 1,307 973 927 1,300 1,098 742 3,986 4,067Effective Tax Rate (%) 22.1 13.9 20.0 20.9 18.0 26.5 35.4 25.5 19.3 25.3Reported PAT 3,670 4,099 5,232 3,693 4,233 3,597 2,004 2,172 16,692 12,010Adj PAT 3,670 4,101 5,232 3,603 4,233 3,589 2,004 2,172 16,619 12,014Change (%) 396.0 296.5 15.7 0.9 15.3 -12.5 -61.7 -39.7 27.3 -27.7E: MOSL EstimatesSiddharth Bothra (Sbothra@MotilalOswal.com)/Satyam Agarwal (Agarwals@MotilalOswal.com)/ Mansi Trivedi (Mansi.Trivedi@MotilalOswal.com)31 December 2008240

Results PreviewQUARTER ENDING DECEMBER 2008RetailingBSE Sensex: 9,647 S&P CNX: 2,959 31 December 2008COMPANY NAMEPantaloon RetailTitan IndustriesDiscount sales likely to clear high cost inventoriesRetailers across formats have witnessed declining growth rates in revenue and footfallsdue to the economic slowdown. The impact is not uniform as categories like consumerdurables have been hit harder than other segments. Retailers are facing problems likehigh inventories and late payments to FMCG players and the pressure is likely to increasein the medium term. We expect retailers to announce aggressive discount schemes toclear the inventories, as decline in input costs will reduce prices of end products.Most retailers scaling down expansion plansFunding problems and lack of free cash flows are forcing closures and scale down inexpansion plans of many retailers with focus shifting to lesser number of stores in focusedcities. While Reliance Retail is considering closure/restructuring of several unviable stores,smaller players like Vishal Retail, Indiabulls Retail and Subhiksha are grappling withsupply chain issues like piling inventory, rising dues to suppliers as well as negotiation forlower rentals. However, softening real estate prices would provide significant benefit forlarge players with presence across geography and formats (like Pantaloon) to expandtheir operations due to their ability to attract footfalls and ensure certain minimum credibilityto the mall.Valuation and viewWe expect near term margin and cash flow pressures on retail industry. Inability to getrid of high cost inventory would add to the woes of the industry. High cost discretionaryspend is likely to get impacted in the medium term, which would reduce volumes andimpact the profitability. We expect specialty retailers to be better placed in such a scenariodue to a dedicated consumer base. We are positive on the long term potential of the retailopportunity, given the low level of penetration and demographics; however, short termconcerns and execution challenges continue. We are neutral on the sector and ratePantaloon as our top pick.EXPECTED QUARTERLY PERFORMANCE SUMMARYRECO SALES EBITDA NET PROFIT(RS MILLION)DEC.08 CHG. (%) DEC.08 CHG. (%) DEC.08 CHG. (%)RetailingPantaloon Retail Buy 18,200 48.4 1,690 54.2 439 38.7Titan Industries Neutral 10,600 32.1 725 44.8 384 24.5Sector Aggregate 28,800 41.9 2,415 51.2 823 31.7Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com)Tel:+9122 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com)Tel:+9122 3982541831 December 2008241

RetailingLower income growth to impact consumptionRetailers across formats have witnessed declining growth rates in revenue and footfallsdue to the economic slowdown. Recent terror attacks in Mumbai led to lower footfalls inmalls and high-end streets. Expectations of revenue growth have come down from 30-40% levels to a modest 20%. While fall in revenue/sf was imminent as retailers venturedinto Tier II and Tier III cities, the impending consumption slowdown raises questions onthe viability of several new stores and formats. Uncertain income growth of employees insectors like banking and financial services, IT and infrastructure is expected to impactdemand pick up, especially at the upper end.Increasing focus on value retailing; discount sales to clear high costinventoriesWe believe lifestyle retailing, being dependent on discretionary spend, would the first oneto be impacted by the economic slow down. The trend is already visible with value retailingreporting higher growth than lifestyle formats. We expect the trend to continue as valueretailing/discount retailing has greater exposure to basics/essentials which can’t be avoidedor deferred. We expect categories like Food, Grocery and General Merchandise not to getimpacted significantly, while the impact on categories like Consumer Electronics, Furniture,and Catering seems to be more severe as these requirements are likely to be avoided orpostponed. We believe retailers would have to continue to depend heavily on discounts/offers to clear off the inventory as commodity meltdown will reduce the product pricessignificantly.VALUE RETAILING MORE RESILIENT THAN LIFESTYLE FORMAT150Value Retailing (%) Lifestyle Retailing (%)100500-50Sep-07Oct-07Nov-07Dec-07Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Source: Company/MOSL31 December 2008242

RetailingRetailers hold back aggressive expansion plans; smaller stores to breakevenfasterFunding problems and lack of free cash flows are forcing closures and scale down inexpansion plans. The trend is visible across formats and players with the struggle beingharder for marginal retailers. While Reliance Retail is considering closure/restructuring ofseveral unviable stores, smaller players like Vishal Retail, Indiabulls Retail and Subhikshaare grappling with supply chain issues like piling inventory, rising dues to suppliers as wellas negotiation for lower rentals.Rationalization of expansion can be seen both at macro and store levels. While mostplayers are running behind store rollout plans, many are reconsidering the format viabilityunder the current environment. Retailers are adopting a more focused strategy and arelikely to open more number of stores in existing cities. Smaller formats on lines ofneighborhood stores are being preferred to the hypermarkets/discount stores due to lowerbreak-even times. For instance, Pantaloon has been more aggressive in store rollouts inFood Bazaar, KB’s Fair Price and Big Bazaar formats (of smaller size). Reliance Retailhas increased its focus on Reliance Fresh with Reliance Mart, Trends and Jewels taking abackseat.Competition benign; soft real estate prices to benefitRising competitive intensity, especially at the store level, that was a major concern fewquarters back has turned benign with many retailers, small and big, reconsidering theirbusiness plans. Lack of capital (from capital markets as well as credit Markets) hasconstrained expansion plans as most retailers are not generating free cash flows.Real estate prices are softening, which would provide significant benefit for large playersto expand their operations. Developers are more willing to work with large anchor tenantswho can provide certain minimum footfalls to their properties. We believe well-establishedplayers are in a better position to tide over the current downturn and if the cards areplayed right, they could emerge victorious with prime real estate and skilled manpower atlower cost, establish strong private labels and build-up supply chain for operating leverageto kick in.Valuation and viewWe are positive on the long term potential of the retail opportunity, given the low level ofpenetration and demographics; however, short term concerns and execution challengesremain. Inability to get rid of high cost inventory would add to the woes of the industry.High cost discretionary spend is likely to get impacted in the medium term, which wouldreduce volumes and impact the profitability. We expect specialty retailers to be betterplaced in such a scenario due to a dedicated consumer base. We are neutral on the sectorand rate Pantaloon as our top pick.31 December 2008243

RetailingStock performance and valuationsSTOCK PERFORMANCE (%)ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARRetailingPantaloon Retail -8 -71 17 -19 5 -12Titan Industries -17 -41 8 12 -4 19RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)105SensexMOSL Retail Index110MOSL Retail IndexSensex95908570755065Sep-08 Oct-08 Nov-08 Dec-0830Dec-07 Mar-08 Jun-08 Sep-08 Dec-08COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10ERetailingPantaloon Retail 218 Buy 7.9 10.9 17.0 27.4 20.0 12.8 10.8 7.4 5.6 9.6 9.7 12.4Titan Industries 927 Neutral 33.9 43.5 57.4 27.4 21.3 16.2 17.2 13.0 10.0 33.8 33.2 33.1Sector Aggregate 26.9 19.7 13.5 13.0 9.1 6.9 15.6 15.2 17.531 December 2008244

Results PreviewSECTOR: RETAILINGSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGPF INREUTERS CODEPART.BO31 December 2008Previous Recommendation: BuyPantaloon RetailBuyRs218Equity Shares (m) 158.852-Week Range (Rs) 795/1771,6,12 Rel. Perf. (%) 1/-3/-19M.Cap. (Rs b) 34.6M.Cap. (US$ b) 0.7YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA06/07A 32,367 611 4.2 -11.2 52.3 2.9 5.6 7.4 1.3 20.106/08A 50,489 1,259 7.9 90.6 27.4 2.6 9.6 10.6 1.0 10.806/09E 73,624 1,811 10.9 36.9 20.0 1.9 9.7 12.5 0.7 7.406/10E 92,300 2,898 17.0 56.2 12.8 1.6 12.4 14.3 0.6 5.6? We expect Pantaloon’s revenue to grow 48.4% YoY in 2QFY09 with value retailing driving growth during thequarter.? EBITDA margin is expected to decline by 40bp to 9.3%; PAT is expected at Rs439m, a growth of 38.7% YoY.? The company has indicated that consequent to the recent slowdown, there has been a visible downtrading to value formoney formats like Big Bazaar and Food Bazaar. We expect lifestyle retailing (Pantaloon and Central) to reportlower growth as consumers defer/avoid discretionary spend.? Management has increased its focus on private labels, and is entering categories like like toilet soaps, detergents,hand washes and cosmetics. Earlier initiatives of self launched products have been a success with potato chips andbutter having 33% and 21% share in Food Bazaar sales volume in their respective categories.? We expect margins for Pantaloon to expand going forward, as benefits of lower logistics of cost, staff cost, increasedshare of private labels start flowing in. We have factored in a 70bp expansion in margins for FY10.? The stock is currently trading at 20x FY09E EPS and 12.8x FY10E EPS. We maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E JUNE FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QENet Sales 10,864 12,268 13,543 13,814 15,112 18,200 19,500 20,812 50,489 73,624YoY Change (%) 80.1 63.0 57.3 35.5 39.1 48.4 44.0 50.7 56.0 45.8Total Exp 9,908 11,171 12,402 12,402 13,563 16,510 17,700 18,851 45,884 66,625EBITDA 956 1,096 1,141 1,412 1,549 1,690 1,800 1,961 4,605 7,000Margins (%) 8.8 8.9 8.4 10.2 10.2 9.3 9.2 9.4 9.1 9.5Depreciation 153 204 223 254 319 340 350 396 834 1,405Interest 352 418 429 655 684 700 730 799 1,853 2,913Other Income 7 13 17 1 12 15 18 25 38 70PBT 459 487 506 504 557 665 738 792 1,956 2,752Tax 162 171 185 178 196 226 251 268 697 941Rate (%) 35.3 35.1 36.6 35.4 33.5 34.0 34.0 33.9 35.6 34.2Adjusted PAT 297 317 321 325 362 439 487 523 1,259 1,811YoY Change (%) 82.9 65.3 71.5 369.1 21.8 38.7 51.7 60.8 106.2 43.8Repoorted PAT 297 317 321 325 362 439 487 523 1,259 1,811E: MOSL EstimatesAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com)Tel:+9122 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com)Tel:+9122 3982541831 December 2008245

Results PreviewSECTOR: RETAILINGSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGTTAN INREUTERS CODETITN.BO31 December 2008Previous Recommendation: NeutralTitan IndustriesNeutralRs927Equity Shares (m) 42.352-Week Range 1,715/7101,6,12 Rel. Perf. (%) -7/22/12M.Cap. (Rs b) 39.2M.Cap. (US$ b) 0.8YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 20,902 1,181 26.6 16.8 34.8 12.0 36.1 29.7 2.0 19.703/08A 29,937 1,483 33.4 25.5 27.8 9.0 34.0 30.7 1.4 16.303/09E 39,396 2,087 47.0 40.7 19.7 6.6 35.0 36.1 1.0 11.903/10E 48,380 2,661 59.9 27.5 15.5 5.0 33.6 36.6 0.8 9.6? We expect Titan to register a 32.1% growth in revenue to Rs10.6b in 3QFY09.? EBITDA margin is likely to expand 60bp to 6.8%, while adjusted PAT is expected to grow by 24.5% to Rs384m.? Jewelry sales have been robust during the Diwali season as the sharp fall in gold prices led to good demand. Further,decline in returns of other asset classes further fueled demand for gold, it being considered as a safe haven.? Watch business is expected to benefit from the strong pickup in Sonata and the new launch in the Fastrack range.? Titan Eye+ is performing as per expectations. The management has guided for 60 stores by the year-end and expectsto add another 55-60 stores every year after that.? The stock is currently trading at 19.7x FY09E EPS and 15.5x FY10E EPS. We maintain Neutral.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 6,575 7,114 8,024 8,225 8,103 10,886 10,600 10,326 29,937 39,915YoY Change (%) 49.1 35.9 51.6 37.9 23.2 53.0 32.1 25.5 43.2 33.3Total Exp 6,206 6,318 7,523 7,487 7,543 9,624 9,875 9,437 27,533 36,479EBITDA 369 797 501 738 561 1,261 725 890 2,404 3,436Margins (%) 5.6 11.2 6.2 9.0 6.9 11.6 6.8 8.6 8.0 8.6Depreciation 72 72 74 79 77 79 88 100 297 344Interest 48 39 51 63 52 62 65 58 201 237Other Income 5 4 5 4 8 12 12 9 18 42PBT 254 689 381 600 440 1,133 584 741 1,923 2,897Tax 74 199 72 95 117 261 200 233 440 811Rate (%) 29.1 28.9 19.0 15.8 26.7 23.1 34.2 31.4 22.9 28.0Adjusted PAT 180 490 308 505 322 872 384 508 1,483 2,086YoY Change (%) 158.5 43.1 4.2 6.2 79.1 78.0 24.5 0.7 25.3 40.7Extraordinary Income -54 -27 0 100 0 0 0 0 20 0Reported PAT 126 463 308 605 322 872 384 508 1,503 2,086E: MOSL EstimatesAmnish Aggarwal (AmnishAggarwal@MotilalOswal.com)Tel:+9122 39825404/Amit Purohit (AmitPurohit@MotilalOswal.com)Tel:+9122 3982541831 December 2008246

Results PreviewQUARTER ENDING DECEMBER 2008TelecomBSE Sensex: 9,647 S&P CNX: 2,959 31 December 2008COMPANY NAMEBharti AirtelIdea CellularReliance CommunicationSeasonal strength to support 3Q operating performanceWe expect robust 3QFY09 operating performance from the listed telecom majors (Bharti,Idea and RCOM) supported by strong subscriber growth of 10-12% QoQ. SeasonalMOU uptick should cushion ARPU decline to 2-3% QoQ. We expect EBITDA marginto remain largely stable, leading to QoQ EBITDA growth of 6-7% for Bharti and RCOM.Idea’s reported EBITDA growth is likely to be much higher due to proportionateconsolidation of Spice Communications. Even on ex-Spice basis, we expect Idea toclock higher growth on more pronounced seasonality in revenue (+10% QoQ) coupledwith stable margins.Idea and RCOM likely to exhibit YoY decline in earnings; Bharti robustContinued aggressive expansions are expected to drag earnings for Idea (3QFY09EPAT down 12% YoY) and RCOM (3QFY09E PAT down 8% YoY). Idea’s reportedPAT will be impacted by proportionate consolidation of Spice. We estimate PAT declineof 8% YoY and 24% QoQ for RCOM, primarily owing to our assumption of net financecost of Rs1.65b v/s net finance income in comparable quarters. For Bharti, we expectPAT growth to remain robust at 31% YoY and 10% QoQ driven by steady operatingperformance. Absence of significant forex loss should aid QoQ growth for Bharti, thoughPAT impact will be likely offset by absence of tax reversals.RCOM EBITDA downgraded by 2-6% on lower ARPU and marginWe are downgrading our EBITDA estimates for RCOM by 2-6%, driven by 3-6% lowerARPU assumptions (Rs264 v/s Rs271 for FY09E and Rs241 v/s Rs255 for FY10E) andlower margins in the wireless segment. Our FY09E PAT estimate remains largelyunchanged on lower tax rate assumption while FY10E PAT is downgraded by 7%.Idea PAT downgraded 10-20% to reflect lower margin, Spice consolidationOur EBITDA estimates for Idea remain largely unchanged despite factoring in Spiceconsolidation, implying margin downgrade for core operations (ex-Spice). The downgradeprimarily reflects margin pressure in established circles from increased competition.From 3QFY09, Idea will consolidate Spice on a JV basis (41% stake). Full consolidationEXPECTED QUARTERLY PERFORMANCE SUMMARYRECO SALES EBITDA NET PROFIT(RS MILLION)DEC.08 CHG. (%) DEC.08 CHG. (%) DEC.08 CHG. (%)TelecomBharti Airtel Buy 96,684 38.8 39,679 33.9 22,529 30.8Idea Cellular Neutral 26,452 54.9 6,844 20.7 2,086 -11.9Reliance Comm Buy 60,400 23.9 24,366 15.7 12,807 -8.2Sector Aggregate 183,536 35.5 70,889 25.8 37,422 11.6Shobhit Khare (Shobhit.Khare@MotilalOswal.com); Tel: +91 22 3982 542831 December 2008247

Telecomwill only take place from FY10 pending court approvals for the merger, and would alsoresult in 6.6% equity dilution. While Spice consolidation will contribute positively at theEBITDA line (~3%), PAT contribution is negative (~15% impact) due to higher depreciationand interest cost.Competitive intensity to increase; major operators well-funded post recentcapital infusionRollout activity and new launches are likely to accelerate over the next few quarters,marking likely increase in competitive intensity. MNP implementation during FY10 couldput upward pressure on subscriber retention costs and drag sector margins. We highlightthat most major operators are well funded post recent equity deals in Idea and TataTeleservices and remain well-placed financially to absorb the "new-business" losses fromupcoming launches. During the quarter, NTT DOCOMO announced that it will acquire 26per cent of TTSL's common shares for INR 130.7b (US$2.7 billion). As per our estimatesthe deal pegs TTSL's EV at ~US$12b v/s ~US$4.5b in the March 2006 Temasek deal.We compute EV/Sub at US$331 and EV/Sales (FY08) at 8.8x. We estimate TTSL reachedEBITDA break-even in FY08.INDIAN WIRELESS: RECENT DEAL HISTORYMONTH COMPANY ACQUIRED STAKE CONSIDERATION EV CIRCLES + SUBS EV/SUB TRAILINGBY (%) (US$M) (US$M) LICENCES (M)* (US$) EV/EBITDA (X)Feb-07 Hutch-Essar Vodafone 67 11,700 18,800 15 24.4 770 ~30Sep-07 Shyam Telecom Sistema 51 58 114 23 0.3 - NMJun-08 Spice Idea 60 741 1,266 2 4.5 281 ~30Jun-08 Idea TMI 15 1,500 11,801 23 26.1 452 ~26Sep-08 SWAN Telecom Etisalat 45 900 1,100 13 - - NMOct-08 Unitech Wireless Telenor 60 1,070 1,100 23 - - NMNov-08 Tata Teleservices NTT DOCOMO 26 2,700 9,685 23 29.3 331 NM*As of deal announcement dateSource: MOSL3G auctions - Adequate spectrum availability implies low risk of overbiddingAdequate spectrum availability in most circles implies low risk of overbidding. However,spectrum fee and rollout capex would put earnings under pressure for the winning bidders.We believe Bharti remains best placed for the auctions given unlevered balance sheet,synergy with its 2G operations, and large captive high ARPU subscriber base.As per the 3G information memorandum, 71 slots (2x5MHz each) would be put up for theupcoming 3G auction across 20 out of the total 22 telecom service areas. One slot in everyservice area would be reserved for the PSU incumbents (except Rajasthan where nospectrum is available). Paucity of spectrum would mean that no slot would be availablefor auction in the North-East service area and only one slot would be available in WestBengal.31 December 2008248

TelecomBidding in the lucrative Delhi and Gujarat service areas will likely be more competitivegiven availability of only 2 slots for the auction. In all other service areas, 3-4 slots wouldbe available for the auction.SERVICE AREA-WISE 3G SPECTRUM TO BE AUCTIONEDSERVICE AREA CATEGORY RESERVE TOTAL PAIRED NO. OF BLOCKS NO. OF BLOCKS NO. OF BLOCKSPRICE (RS B) BANDWIDTH TO OF 2X5 MHZ OF 2X5 MHZ OF 2X5 MHZBE ALLOTTED TO BE ALLOTTED RES. FOR BSNL/MTNL AVAILABLE FOR AUCTIONDelhi Metro 1.6 15 3 1 2Mumbai Metro 1.6 25 5 1 4Kolkata Metro 0.8 25 5 1 4Maharashtra A 1.6 25 5 1 4Gujarat A 1.6 15 3 1 2Andhra Pradesh A 1.6 25 5 1 4Karnataka A 1.6 25 5 1 4Tamil Nadu A 1.6 25 5 1 4Kerala B 0.8 25 5 1 4Punjab B 0.8 25 5 1 4Haryana B 0.8 25 5 1 4Uttar Pradesh (E) B 0.8 25 5 1 4Uttar Pradesh (W) B 0.8 20 4 1 3Rajasthan B 0.8 0 0 NA 0Madhya Pradesh B 0.8 25 5 1 4West Bengal B 0.8 10 2 1 1Himachal Pradesh C 0.3 20 4 1 3Bihar C 0.3 25 5 1 4Orissa C 0.3 25 5 1 4Assam C 0.3 25 5 1 4North East C 0.3 5 1 1 0Jammu & Kashmir C 0.3 25 5 1 4Sum 20.2 460 92 21 71Source: DOT/MOSLRegulatory developments on an even keelInterconnect Usage Charge (IUC) review and proposed changes in licence fee/spectrumcharge structure are two key issues clouding the earnings visibility in the wireless space.Contrary to the popular perception, our calculations suggest minimal impact on earnings.Termination charge cut: Long way to go, traffic patterns to catch upTRAI is reviewing the interconnect usage charge (IUC) framework, which could lead toa cut in termination charges (currently at Rs0.3/min). We expect IUC review to be a longdrawn process given enormous stakes involved. A recent TRAI note pointed out, "there isno shortcut to this exercise", drawing parallels from such a review undertaken in the pastby the British regulator Ofcom, which had lasted for almost two years. A potential cut intermination charges post the review is unlikely to meaningfully impact GSM wirelessearnings, in our view. Although lower termination charges would negatively impact operatorsthat have higher proportion of the traffic as in-bound, substitution from fixed line to wireless31 December 2008249

Telecomcontinues to lift the outgoing traffic, thus narrowing down the incoming-outgoing deficit.The proportion of incoming to outgoing minutes for GSM, although currently >1x, shouldreach parity within a few quarters.GSM INCOMING/OUTGOING RATIO APPROACHING UNITY2701.42Incoming MOU Outgoing MOU I/O ratio1.482401.362101.271.241801501.18 1.171.121.14 1.121.101.09 1.061.001QFY07 2QFY07 3QFY07 4QFY07 1QFY08 2QFY08 3QFY08 4QFY08 1QFY09Source: TRAI/MOSLWireless spectrum charge hike: Partial licence fee waiver to the rescueWireless spectrum charges (levied as percentage of Adjusted Gross Revenue) have beenhiked by 100bp for allocations up to 8MHz and 200bp thereafter. If not passed-through,this could hurt EBITDA margin by ~100bp for Bharti and Idea but only ~40bp for RCOMgiven lower spectrum allocation/requirement in CDMA. However, for the larger incumbents,this shortfall could be more than compensated in FY10 by the partial licence fee waiver -an incentive for deeper coverage. Assuming that full 2% waiver accrues, margin accretionwould be 110bp for Bharti, 150bp for Idea, and 50bp for RCOM. Net impact would thereforebe neutral to positive for the listed majors.CUMULATIVE IMPACT OF SPECTRUM CHARGE HIKE AND USO REDUCTION WILL BE NEUTRAL TO POSITIVE FORLARGE INCUMBENTSIncreased Spectrum Charge impact (bp) Lower USO Fee impact (bp) Net Impact (bp)170147Cumulative impact ofchange in licence fee/spectrum charge structurewill be neutral to positive for90101111252476large incumbentsBharti Idea RCOM-70-41-99 -95-150Source: MOSL31 December 2008250

TelecomCompetitive pressures to build at the top-end?The new entrants are likely to focus on the international roaming and the high ARPU postpaidsegment which together account for >25% of total GSM industry revenues. Weanalyze the earnings impact of this likely heightened competition at the top-end of theIndian mobile market.In-roaming: How much earnings impact can the new competition affect?Indian in-roaming (in-coming charges received from visiting foreigners) market is estimatedat US$0.7-1b and is predominantly GSM. Post new GSM rollouts, the new entrants couldpotentially offer higher settlement rates to foreign operators, thus driving down incumbentmarket share and current high margins in this category. We estimate ~3% risk to Bharti'searnings on lower in-roaming EBITDA.STRESS TESTING EARNINGS IMPACT OF MORE COMPETITION IN THE IN-ROAMING SEGMENT (RS B)CurrentAll India international in-roaming revenues 40.0Bharti’s in-roaming Revenues (Assuming ~33% share) 13.3Pass-through to international partner (10% of rev) 1.3AGR from in-roaming 12.0Licence fee+spectrum charges (Assuming 12% of rev) 1.4Other costs (5% of rev) 0.7Bharti’s in-roaming EBITDA 9.9EBITDA Margin (%) 74Post RCOM’s GSM LaunchAll India international in-roaming revenues (Rsb) 40.0Bharti’s in-roaming Revenues (Assuming ~25% share) 10Pass-through to international partner (25% of rev) 2.5AGR from in-roaming 7.5Licence fee+spectrum charges (Assuming 12% of rev) 0.9Other costs (5% of rev) 0.5Bharti’s in-roaming EBITDA 6.1EBITDA Margin (%) 61Change in EBITDA (Rs b) 3.8Bharti’s FY10E PBT (Rs b) 135% downside risk to EPS 2.8Source: MOSLPostpaid segment: A stable market but MNP could cause disruptionsAggregate GSM postpaid revenue and subscriber base has been largely stagnant over thepast 7-8 quarters. Postpaid users (~22% of GSM revenue), perceived to be high margincustomers, could be specifically targeted by new competition. MNP introduction in metroswill almost coincide with new rollouts, creating likely market disruption. Assuming thatnew competition precipitates 10-20% decline in postpaid ARPU for GSM wireless industry,wireless revenue at risk would be -4% (postpaid being ~20% of wireless revenue) andEBITDA at risk could be 3-6%.31 December 2008251

TelecomSTABLE POSTPAID REVENUE BASE160Postpaid Revenue (Rsb)Prepaid Revenue (Rsb)93% of the incrementalrevenues over the periodhave been contributed byprepaid. Mix of postpaidrevenues has declined from32% in 2QFY07 to 22% in1QFY0912080400111 11384899659 66 7428 28 26 29 30 31 32 322QFY07 3QFY07 4QFY07 1QFY08 2QFY08 3QFY08 4QFY08 1QFY09Source: TRAI/MOSLBuy Bharti for earnings visibility, RCOM on cheap valuations and likelyacceleration in growth ratesWe maintain Buy on Bharti which remains our top pick on highest earnings visibility in thecurrent challenging margin environment, low capex intensity, unlevered balance sheet, andrelatively better-positioned tower portfolio for potential value accretion. Valuations at 7.4xEV/ EBITDA and 13x P/E FY10E are well supported by 25-30% earnings and EBITDACAGR over FY08-10E. We also find the valuations attractive for RCOM given a significantdiscount of 20-30% v/s Bharti on EV/EBITDA and ~40% on P/E. We maintain Buy onRCOM based on upside to KPIs and market share post GSM scale-up. We believe thatRCOM should be beneficiary of easing liquidity and concerns on leverage and marginsappear overdone.RCOM EV/EBITDA PREMIUM (DISCOUNT) V/S BHARTI60%35%Average = 10%10%-15%-40%Mar-06Jun-06Sep-06Dec-06Mar-07Jun-07Sep-07Dec-07Mar-08Jun-08Sep-08Dec-08MOSL31 December 2008252

TelecomWIRELESS KPIS1QFY08 2QFY08 3QFY08 4QFY08 1QFY09 2QFY09 3QFY09E YOY (%) QOQ (%)EOP Wireless Subs (M)Bharti 43 49 55 62 69 77 86 55 10Idea* 16 19 21 24 27 30 34 61 12RCOM 32 36 41 46 51 56 61 50 9Av. Wireless Subs (M)Bharti 40 46 52 59 66 73 82 57 11Idea* 15 17 20 23 26 29 32 62 12RCOM 30 34 39 43 48 53 59 52 10ARPU (Rs/Month)Bharti 390 366 358 357 350 331 322 -10 -3Idea* 320 288 279 287 278 259 254 -9 -2RCOM 375 361 339 317 282 271 263 -22 -3MOU Per SubBharti 478 469 474 507 534 526 537 13 2Idea* 381 360 377 411 428 417 430 14 3RCOM 510 490 449 430 424 423 431 -4 2Revenue Per Min (Rs)Bharti 0.82 0.78 0.76 0.70 0.66 0.63 0.60 -21 -5Idea* 0.84 0.80 0.74 0.70 0.65 0.62 0.59 -20 -5RCOM 0.74 0.74 0.75 0.74 0.67 0.64 0.61 -19 -5Wireless Traffic (B Min)Bharti 57 64 74 89 105 116 131 77 13Idea* 17 19 22 28 33 36 42 85 15RCOM 46 50 52 56 61 68 76 46 12* All operational numbers for Idea are on ex-Spice basisQUARTERLY FINANCIALS1QFY08 2QFY08 3QFY08 4QFY08 1QFY09 2QFY09 3QFY09E YOY (%) QOQ (%)Revenue (Rs B)Bharti 59.0 63.4 69.6 78.2 84.8 90.2 96.7 39 7Idea 14.8 15.6 17.1 19.7 21.7 23.0 26.5 55 15RCOM 43.0 45.8 48.7 53.1 53.2 56.4 60.4 24 7EBITDA (Rs B)Bharti 24.5 27.1 29.6 32.5 35.2 37.0 39.7 33.9 7.3Idea 5.1 5.1 5.7 6.6 7.2 6.0 6.8 20.7 13.6RCOM 18.1 19.6 21.1 23.2 22.5 23.0 24.4 15.7 5.9EBITDA Margin (%)Bharti 41.4 42.8 42.6 41.6 41.5 41.0 41.0 -151bps 3bpsIdea 34.7 32.7 33.2 33.5 32.9 26.2 25.9 -733bps -33bpsRCOM 42.2 42.8 43.2 43.6 42.3 40.8 40.3 -288bps -43bpsPAT (Rs B)Bharti 15.1 16.1 17.2 18.5 20.3 20.5 22.5 30.8 10.1Idea 3.1 2.2 2.4 2.8 2.6 1.4 2.1 -11.9 44.8RCOM 12.2 13.3 14.0 15.7 16.4 16.8 12.8 -8.2 -23.6EPS (Rs)Bharti 8.0 8.5 9.1 9.8 10.7 10.8 11.9 31 10Idea 1.2 0.8 0.9 1.0 1.0 0.5 0.7 -25 45RCOM 6.0 6.5 6.8 7.6 7.9 8.1 6.2 -8 -24Source: MOSLSustained subscribermomentum - averagesubscriber base growthof 10-12% QoQWe expect QoQ ARPUdecline to be cushionedat 2-3% QoQ driven byseasonal MOU uptickWe estimate QoQEBITDA growth of 6-7%for Bharti and RCOM.Idea is likely to reporthigher growth of 14%QoQ due to higherseasonality andproportionate SpiceconsolidationEBITDA marginto remain stable QoQ.Earnings divergence tocontinue, mainlyreflecting dissimilarcapex intensity, impactof acquisitions, andforex treatment for netfinance costs31 December 2008253

TelecomESTIMATE CHANGE SUMMARYBHARTI RCOM IDEAFY09E FY10E FY09E FY10E FY09E FY10EWireless Subs (M)Old 93 119 68 90 38 51New 93 119 67 91 38 51% Chng 0.3 0.7 -0.8 2.1 0.0 0.0Wireless ARPU (Rs/Month)Old 325 293 271 255 247 229New 325 286 264 241 256 255% Chng -0.1 -2.3 -2.6 -5.6 3.7 11.4Revenue (Rs B)Old 373 459 239 302 96 124New 373 456 234 294 99 138% Chng 0.1 -0.7 -2.0 -2.8 3.7 11.4EBITDA (Rs B)Old 154 194 98 132 27 38New 153 189 96 123 27 38% Chng -0.7 -2.4 -2.1 -6.4 0.2 0.6Net Profit (Rs B)Old 86.8 104.4 58.4 64.9 9.2 14.5New 86.4 104.2 58.2 60.2 8.3 11.7% Chng -0.5 -0.3 -0.4 -7.2 -10.0 -19.0EPS (Rs)Old 45.7 55.0 28.3 31.5 3.0 4.7New 45.5 54.9 28.2 29.2 2.7 3.5% Chng -0.5 -0.3 -0.4 -7.2 -10.0 -24.0Net Finance Cost (Rs B)Old 7.4 1.6 -1.1 7.4 4.7 4.1New 7.5 1.9 -1.1 8.1 4.7 5.3% Chng 0.8 19.7 -3.8 9.9 -0.7 28.7Tax Rate (%)Old 11.7 21.0 -0.4 5.0 7.5 12.5New 11.0 18.0 -2.2 2.0 7.6 2.0bp Chng -62bp -300bp -181bp -300bp 12bp -1050bpSource: MOSLRevenue estimatesdowngraded for RCOMon lower ARPUassumptions, upgradedfor Idea to factor-in SpiceconsolidationEBITDA margindowngraded for allplayers to reflect likelyincrease in competition. Ourconsolidated EBITDA est forIdea remains largelyunchanged despite Spiceconsolidation, reflectingdowngrade forIdea operationsex-SpiceWe reduce ourFY10E tax rate forall the three companiesas we find our previousassumptions aggressive.RCOM's FY10E earningsdowngraded by 7% drivenby the EBITDA downgrade.Idea's earnings downgradedby 10-19% to reflect coreEBITDA downgrade andimpact of Spiceconsolidation31 December 2008254

TelecomStock performance and valuationsSTOCK PERFORMANCE (%)ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARTelecomBharti Airtel -9 -28 16 24 9 19Idea Cellular -30 -62 -5 -10 -13 -14Reliance Comm. -32 -70 -7 -17 -14 -22RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)105SensexMOSL Telecom Index110MOSL Telecom IndexSensex95908570755065Sep-08 Oct-08 Nov-08 Dec-0830Dec-07 Mar-08 Jun-08 Sep-08 Dec-08COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10ETelecommunicationBharti Airtel 715 Buy 35.4 45.5 54.9 20.2 15.7 13.0 12.3 9.2 7.4 36.9 31.9 28.6Idea Cellular 53 Neutral 4.0 2.8 3.5 13.3 18.7 14.9 9.7 7.6 6.3 30.2 10.9 8.5Reliance Comm 227 Buy 26.7 28.2 29.2 8.5 8.1 7.8 6.9 7.1 5.3 22.7 19.6 17.8Sector Aggregate 15.0 13.0 11.3 10.0 8.3 6.6 25.8 21.1 19.431 December 2008255

Results PreviewSECTOR: TELECOMBharti AirtelSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGBHARTI INREUTERS CODEBRTI.BOEquity Shares (m) 1,89652-Week Range (Rs) 1,027/4841,6,12 Rel. Perf. (%) 0/27/24M.Cap. (Rs b) 1,355.5M.Cap. (US$ b) 27.9QUARTERLY PERFORMANCE (CONSOLIDATED)31 December 2008Previous Recommendation: BuyYEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 185,196 42,572 22.5 88.0 31.8 9.9 37.0 26.6 7.5 18.83/08A 270,250 67,008 35.4 57.4 20.2 6.0 36.9 27.3 5.2 12.33/09E 373,287 86,368 45.5 28.7 15.7 4.3 31.9 26.4 3.8 9.23/10E 454,208 104,276 54.9 20.7 13.0 3.3 28.6 23.4 3.1 7.4(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEGross Revenue 59,046 63,374 69,639 78,191 84,833 90,203 96,684 101,567 270,250 373,287YoY Growth (%) 53.1 45.4 41.7 45.0 43.7 42.3 38.8 29.9 45.9 38.1QoQ Growth (%) 9.5 7.3 9.9 12.3 8.5 6.3 7.2 5.1Total Operating Expenses 34,580 36,277 40,005 45,673 49,612 53,210 57,005 60,290 156,535 220,116EBITDA 24,466 27,097 29,634 32,518 35,221 36,993 39,679 41,277 113,715 153,171YoY Growth (%) 62.9 59.2 47.8 45.1 44.0 36.5 33.9 26.9 52.6 34.7QoQ Growth (%) 9.2 10.8 9.4 9.7 8.3 5.0 7.3 4.0Margin (%) 41.4 42.8 42.6 41.6 41.5 41.0 41.0 40.6 42.1 41.0Net Finance Costs -1,752 1,126 810 2,157 1,832 5,741 -73 -32 2,341 7,468Non-Operating Income 801 563 586 473 470 21 21 21 2,423 532Depreciation & Amortisation 8,120 9,062 10,377 9,702 10,045 11,549 12,286 13,112 37,260 46,992Profit before Tax 18,901 17,472 19,032 21,132 23,815 19,724 27,486 28,217 76,537 99,238Income Tax Expense / (Income) 3,594 1,135 1,564 2,085 3,282 -1,247 4,398 4,515 8,378 10,948Profit / (Loss) to Min. Shareholders 191 197 244 518 282 508 559 574 1,151 1,923Reported Net Profit / (Loss) 15,116 16,139 17,224 18,529 20,251 20,463 22,529 23,128 67,008 86,368YoY Growth (%) 100.2 72.8 41.8 36.9 34.0 26.8 30.8 24.8 57.4 28.9QoQ Growth (%) 11.7 6.8 6.7 7.6 9.3 1.0 10.1 2.7 57.4 28.9Margin (%) 25.6 25.5 24.7 23.7 23.9 22.7 23.3 22.8 24.8 23.1Mobile ARPU (Rs/month) 390 366 358 357 350 331 322 304 366 325QoQ Growth (%) -3.9 -6.2 -2.2 -0.3 -2.0 -5.4 -2.8 -5.5Mobile MOU/sub/month 478 469 474 507 534 526 537 542 479 535QoQ Growth (%) 0.6 -1.9 1.1 7.0 5.3 -1.5 2.0 1.0E: MOSL Estimates; Financials as per US GAAPShobhit Khare (Shobhit.Khare@MotilalOswal.com); Tel: +91 22 3982 5428BuyRs715? We expect revenue to grow 38.8% YoY and 7.2% QoQ, driven by healthy mobile subscriber growth of 11% QoQ.? EBITDA margin is expected to remain stable QoQ but decline 150bp YoY to 41 %. We expect an overall EBITDAgrowth of 33.9% YoY and 7.3% QoQ.? Mobility revenue is expected to grow 8% QoQ, implying an ARPU of Rs322 (decline of ~3% QoQ). EBITDAmargin for mobile business is expected at ~30%, stable QoQ.? Net profit for the company is expected to grow 30.8% YoY and 10.1% QoQ to Rs22.5b. We have not modeled forany derivative loss due to forex fluctuation. Absence of significant forex loss should aid QoQ growth for Bharti,though earnings impact will be likely offset by absence of tax reversals.? We maintain Buy on Bharti which remains our top pick on highest earnings visibility in the current challenging marginenvironment, low capex intensity, unlevered balance sheet, and relatively better-positioned tower portfolio for potentialvalue accretion. Valuations at 7.4x EV/ EBITDA and 13x P/E FY10E are well supported by 25-30% earnings andEBITDA CAGR over FY08-10E.31 December 2008256

Results PreviewSECTOR: TELECOMIdea CellularSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGIDEA INREUTERS CODEIDEA.BO31 December 2008Previous Recommendation: NeutralNeutralRs53Equity Shares (m) 3,100.152-Week Range (Rs) 149/341,6,12 Rel. Perf. (%) 6/-15/-12M.Cap. (Rs b) 163.2M.Cap. (US$ b) 3.4YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 43,664 5,032 2.2 137.6 23.6 3.5 25.2 11.7 4.3 12.93/08A 67,198 10,404 4.0 77.6 13.3 3.9 30.2 13.8 3.3 9.73/09E 99,480 8,305 2.8 -28.7 18.7 1.3 10.9 7.3 2.1 7.63/10E 138,298 11,708 3.5 25.7 14.9 1.1 8.5 6.3 1.7 6.3? We expect the revenue to grow 54.9% YoY and 15% QoQ. Ex-Spice, the growth is expected at 9.6% QoQ, drivenby ~12% subscriber growth. ARPU is expected to decline by only 2% QoQ, cushioned by seasonal MOU uptick.? EBITDA margin is likely to decline by 730bp YoY and 30bp QoQ to 25.9%. We expect margins in core operations toremain stable with higher EBITDA losses in Mumbai and Bihar likely to be offset by absence of certain one-offs likeMumbai launch expenses. However, proportionate consolidation of Spice (41% JV accounting, EBITDA margin of~15%) will be margin dilutive.? Net profit growth is expected to decline by 11.9% on YoY basis due to higher interest and depreciation, and Spiceconsolidation. On a QoQ basis, earnings are expected to grow by 44.8%, primarily led by a 50% decline in Idea’s (ex-Spice) net finance cost due to lower net debt post cash inflow from TMI.? IDEA trades at 14.9x FY10E EPS and 6.3x FY09E EV/EBITDA. Although valuations are undemanding, we maintainNeutral based on (1) continued pressure on margins from new launches, (2) significant deterioration in return ratios- RoE of ~11% and RoIC of ~10%, and (3) high earnings sensitivity to margin erosion and potential 3G overbidding.QUARTERLY PERFORMANCE (CONSOLIDATED)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEGross Revenue 14,773 15,622 17,081 19,724 21,735 22,993 26,452 28,299 67,198 99,480YoY Growth (%) 64.1 54.7 48.8 50.7 47.1 47.2 54.9 43.5 53.9 48.0QoQ Growth (%) 12.9 5.7 9.3 15.5 10.2 5.8 15.0 7.0Total Operating Expenses 9,645 10,515 11,409 13,118 14,578 16,969 19,609 20,868 44,692 72,025EBITDA 5,128 5,107 5,672 6,606 7,157 6,024 6,844 7,431 22,506 27,455YoY Growth (%) 69.8 43.9 53.1 51.4 39.6 18.0 20.7 12.5 53.8 22.0QoQ Growth (%) 17.5 -0.4 11.1 16.5 8.3 -15.8 13.6 8.6Margin (%) 34.7 32.7 33.2 33.5 32.9 26.2 25.9 26.3 33.5 27.6Net Finance Costs 143 641 782 1,206 1,526 1,497 996 1,148 2,783 4,683Non-Operating Income 3 21 22 129 46 45 77 77 175 180Depreciation & Amortisation 1,887 2,007 2,277 2,597 2,749 3,032 3,694 4,065 8,768 13,540Profit before Tax 3,101 2,480 2,635 2,932 2,928 1,540 2,229 2,295 11,130 9,411Income Tax Expense / (Income) 16 277 268 165 297 99 143 148 726 687Adjusted Net Profit / (Loss) 3,085 2,203 2,368 2,767 2,631 1,441 2,086 2,148 10,404 8,724YoY Growth (%) 259.1 99.9 108.2 43.1 -14.7 -34.6 -11.9 -22.4 106.8 -16.1QoQ Growth (%) 59.5 -28.6 7.5 16.9 -4.9 -45.2 44.7 3.0Margin (%) 20.9 14.1 13.9 14.0 12.1 6.3 7.9 7.6 15.5 8.8Mobile ARPU (Rs/month) 320 288 279 287 278 261 256 246QoQ Growth (%) 0.9 -10.0 -3.1 2.9 -3.1 -6.1 -2.0 -4.0Mobile MOU/sub/month 381 360 377 411 428 417 430 442QoQ Growth (%) -1.6 -5.5 4.7 9.0 4.1 -2.6 3.0 3.0E: MOSL EstimatesShobhit Khare (Shobhit.Khare@MotilalOswal.com); Tel: +91 22 3982 542831 December 2008257

Results PreviewSECTOR: TELECOMReliance CommunicationSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGRCOM INREUTERS CODERLCM.BO31 December 2008Previous Recommendation: BuyBuyRs227Equity Shares (m) 2,063.052-Week Range (Rs) 844/1491,6,12 Rel. Perf. (%) 10/-20/-17M.Cap. (Rs b) 468.8M.Cap. (US$ b) 9.6YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 144,684 4,813 15.6 563.6 14.6 2.3 19.9 11.1 3.3 8.43/08A 190,679 55,095 26.7 71.0 8.5 1.7 22.7 12.0 3.0 6.93/09E 234,099 58,162 28.2 5.6 8.1 1.5 19.6 9.5 2.9 7.13/10E 293,656 60,215 29.2 3.5 7.8 1.3 17.8 9.4 2.2 5.3? We expect revenue to grow 23.9% YoY and 7.0% QoQ to Rs60.4b. The growth would be driven by sustainedwireless additions (subs up 10% QoQ).? We expect wireless ARPU to decline by ~3% QoQ to Rs263. While RPM is expected to decline by 5% QoQ, weexpect the MOU trend to reverse.? EBITDA margin is expected to decline by 40bp QoQ and 290bp YoY. Aggressive network expansion is likely to keepEBITDA margin under pressure.? Pre-minority interest net profit is expected to decline by 8.2% YoY and 23.6% QoQ, primarily owing to our assumptionof net finance cost of Rs1.65b v/s net finance income in comparable quarters. However, RCOM could continue tosurprise positively on the net finance cost driven by treasury income.? We find the valuations attractive for RCOM given a significant 20-30% discount v/s Bharti on EV/EBITDA and~40% discount on P/E. We maintain Buy on RCOM based on upside to KPIs and market share post GSM scale-up.We believe RCOM should be beneficiary of easing liquidity and concerns on leverage and margins are overdone.QUARTERLY PERFORMANCE (CONSOLIDATED)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEGross Revenue 43,037 45,785 48,742 53,114 53,223 56,449 60,400 64,028 190,679 234,099YoY Growth (%) 32.4 29.8 29.8 34.9 23.7 23.3 23.9 20.5 31.8 22.8QoQ Growth (%) 9.3 6.4 6.5 9.0 0.2 6.1 7.0 6.0Total Operating Expenses 24,895 26,166 27,677 29,950 30,722 33,434 36,034 38,245 108,692 138,432EBITDA 18,142 19,618 21,065 23,164 22,501 23,016 24,366 25,782 81,987 95,667QoQ Growth (%) 10.9 8.1 7.4 10.0 -2.9 2.3 5.9 5.8Margin (%) 42.2 42.8 43.2 43.6 42.3 40.8 40.3 40.3 43.0 40.9Net Finance Costs -1,274 -1,125 -1,518 -81 -2,340 -2,353 1,651 1,952 -3,998 -1,090Depreciation & Amortisation 6,192 6,754 7,252 7,856 8,638 9,180 10,160 11,868 28,054 39,846Profit before Tax 13,224 13,989 15,331 15,389 16,203 16,189 12,555 11,962 57,931 56,910Income Tax Expense / (Income) 1,031 698 1,379 -272 -194 -567 -251 -239 2,836 -1,251Adjusted Net Profit / (Loss) 12,193 13,291 13,952 15,661 16,397 16,756 12,807 12,201 55,095 58,162QoQ Growth (%) 19.3 9.0 5.0 12.2 4.7 2.2 -23.6 -4.7Margin (%) 28.3 29.0 28.6 29.5 30.8 29.7 21.2 19.1 28.9 24.8Extraordinary Exp/Minority Interest -15 245 223 629 1275 1447 1100 1157 1082 4979Reported Net Profit / (Loss) 12,208 13,046 13,729 15,032 15,122 15,308 11,707 11,044 54,013 53,183Wireless ARPU (Rs/month) 375 361 339 317 282 271 263 254 341 264QoQ Growth (%) -0.5 -3.7 -6.2 -6.4 -11.0 -3.9 -3.1 -3.2Wireless MOU/sub/month 510 490 449 430 424 423 431 444 461 428QoQ Growth (%) -5.7 -3.9 -8.4 -4.2 -1.4 -0.2 2.0 3.0E: MOSL EstimatesShobhit Khare (Shobhit.Khare@MotilalOswal.com); Tel: +91 22 3982 542831 December 2008258

Results PreviewQUARTER ENDING DECEMBER 2008TextilesBSE Sensex: 9,647 S&P CNX: 2,959 31 December 2008COMPANY NAMEAlok IndustriesArvind MillsRaymondVardhman TextilesPeak season disappoints3Q (October-December) is normally the peak season for the Indian textile industry.However, 3QFY09 has been very disappointing for the domestic textile industry due tosharp fall in demand from developed countries and lower than expected growth in thedomestic market. The slowdown in the textile demand has coincided with thecommissioning of major capacities in the textile industry. Consequently, most textilecompanies have been adversely impacted. The table below depicts the sharp decline insales for few key US retail companies.US RETAILERS MONTHLY COMPARABLE RETAIL SALES (%)APR-08 MAY-08 JUN-08 JUL-08 AUG-08 SEP-08 OCT-08 NOV-08Abercrombie & Fitch 6.0 -1.0 -3.0 -7.0 -11.0 -14.0 -20.0 -28.0Gap -6.0 -14.0 -7.0 -11.0 -8.0 -11.0 -16.0 -10.0H&M** -10.0 14.0 -2.0 3.0 -3.0 -2.0 -2.0 -4.0J.C. Penney -1.7 -4.4 -2.4 -6.5 -4.9 -12.4 -13.0 -11.9Target 3.1 -0.7 0.4 -1.2 -2.1 -3.0 -4.8 -10.4Wal-Mart 3.2 3.9 5.8 3.0 3.0 2.0 2.2 3.4Note: same store sales comparison (at stores opened at least a year ago)Source: MOSLChina’s export growth slowdownSince January 2008, the global textile industry has been witnessing supply side corrections,particularly in China, which controls 50% of the world exports. New labor laws in China,introduced from January 2008, have increased labor costs by 20-25%. The sharp increasein labor cost, coupled with cost inflation across all key raw materials and fuel, haveresulted in capacities closing down in the unorganized Chinese textile sector. As a result,China’s dominance in global textile industry is unlikely to be maintained, which wouldbenefit other low cost textile producers such as India, Pakistan, Bangladesh etc. However,the process may take 6-12 months to start manifesting in the profitability of Indian textilecompanies due to lower global demand (largely due to USA that alone accounts for 40-50% of trade demand).EXPECTED QUARTERLY PERFORMANCE SUMMARYRECO SALES EBITDA NET PROFIT(RS MILLION)DEC.08 CHG. (%) DEC.08 CHG. (%) DEC.08 CHG. (%)TextilesAlok Ind Buy 6,581 19.5 1,591 18.1 371 -24.0Arvind Mills Neutral 6,222 15.9 653 5.6 7 -89.5Raymond Neutral 4,077 22.8 546 183.8 242 145.2Vardhman Textiles Buy 6,855 12.0 973 8.1 116 -71.0Sector Aggregate 23,734 16.8 3,764 23.0 736 -30.1Siddharth Bothra (Sbothra@MotilalOswal.com); Tel: +91 22 3982540731 December 2008259

TextilesThe growth rate for Chinese textile industry exports has been steadily declining over thefew months, which reflects the slowdown in the international textile demand. As a result,large textile capacities have closed down in China and several large real estate companiesare operating at low capacity utilization rates. Apart from the slowdown in the internationaltextile demand, Chinese exports have also been adversely impacted by the steadyappreciation in Chinese Yuan v/s US$.GROWTH RATE FOR CHINESE TEXTILE EXPORTS (%)30.02007 200823.620.010.014.29.516.28.29.05.813.719.315.210.61.7 0.50.0-10.0-4.6April May June July August September OctoberCURRENCIES AGAINST CHINESE YUAN SINCE JANUARY 2008 (INDEX 100)100909489818072 72737060US$ Euro UK India Pakistan Sri LankaSource: MOSL40% higher MSP for cotton pricesGovernment’s move to increase the minimum support price (MSP) for cotton in season2008-09 by 40% has resulted in domestic cotton prices quoting at 15-20% premium tointernational cotton prices. However, the yarn prices have not moved up correspondingly,as a result, profitability of most of the textile companies are under pressure.31 December 2008260

TextilesCOTLOOK A COTTON PRICES (US CENTS/ POUND)10080604020Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Source: Industry/MOSLGovernment bailout package awaitedIndian textile industry has been lobbying with the Government for a stimulus package forthe textile industry, which has been adversely hit due to i) low export demand, ii) lowerthan expected domestic demand, iii) high cotton prices, and iv) volatility in the forex market.Among the several measures that the textile industry is seeking are: a) lowering of cottonMSP, b) increased export sops, and c) disbursement of pending TUF subsidies to thecompanies. Industry has been abuzz with talks of an Rs20b bailout package for the exporters,which could benefit the textile industry.Textile players shift focus from exports to domestic marketA clear trend seems to be emerging in the domestic textile industry, wherein players areshifting their focus from the export market to the domestic market. This shift in strategyhas been driven by two key factors – (1) the export market has become less attractive dueto raw material and labor cost-push and the relative competitive advantage enjoyed byneighboring countries and (2) the domestic market has become extremely attractive onthe back of rising per capita income and emergence of organized retail. This has resultedin large companies such as Arvind, Raymond, Alok etc trying to forward integrate intobranding and retail.Domestic RMG market to emerge as a big opportunityCRISIL estimates RMG market to grow at a CAGR of 14.4% to US$50.4b in FY11 fromUS$25.8b in FY06. It estimates the domestic RMG market to grow at a CAGR of 12.6%to US$32b in FY11 from US$17.7b in FY06. This growth will primarily be led by increasingincome levels and a shift in consumption pattern from tailored to readymade garments.We believe with the consolidation of retail industry in India, the domestic RMG marketwould present a big opportunity for the Indian garment manufacturers.31 December 2008261

TextilesSummaryMost of the textile companies have expanded and modernized their capacities to achievecritical size. Consequently, due to their modern plants and global capacities, they have alsomanaged to attract large international institutional buyers with whom they now haveestablished strategic relationships. This has allowed them to move their business frombeing a transitional-based model to a strategic vendor-based relationship model. While theslowdown in the developed economies would impact export demand in the near term, weexpect the domestic demand growth to compensate for the same. Further, the sharpdepreciation in Indian rupee v/s US dollar could boost textile exports from India in the nearterm. We maintain our Neutral rating on Arvind and Raymond. We remain bullish onVardhman Textiles and Alok Textiles.31 December 2008262

TextilesStock performance and valuationsSTOCK PERFORMANCE (%)ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARTextilesAlok Ind -38 -83 -13 -30 -12 -6Arvind -29 -81 -4 -28 -3 -4Raymond -20 -76 5 -23 5 1Vardhman Textiles -15 -66 10 -13 11 11RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)120SensexMOSL Textiles Index120MOSL Textiles IndexSensex100908060603040Sep-08 Oct-08 Nov-08 Dec-080Dec-07 Mar-08 Jun-08 Sep-08 Dec-08COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10ETextilesAlok Ind 18 Buy 8.4 7.9 9.1 2.1 2.3 2.0 7.3 7.6 7.3 15.2 10.6 11.0Arvind Mills 18 Neutral 1.3 0.6 1.7 13.4 27.1 10.4 7.7 8.7 6.5 1.5 0.7 1.8Raymond 107 Neutral 10.6 9.4 16.9 10.1 11.4 6.3 4.8 3.7 3.0 4.5 3.9 6.9Vardhman Textiles 59 Buy 21.2 13.1 18.6 2.8 4.5 3.2 8.2 7.3 6.5 10.6 6.2 8.3Sector Aggregate 4.6 5.6 3.9 7.2 7.0 6.2 6.4 4.9 6.631 December 2008263

Results PreviewSECTOR: TEXTILESAlok IndustriesSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGALOK INREUTERS CODEALOK.BO31 December 2008Previous Recommendation: NeutralBuyRs18Equity Shares 208.952-Week Range 108/141,6,12 Rel.Per. (%) -16/-26/-30M.Cap (Rs. b) 6.8M.Cap (US$ b) 0.1YEAR NET SALES PAT EPS* EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 18,290 1,419 8.3 32.7 3.9 0.5 17.1 6.6 1.7 7.53/08A 21,593 1,674 8.4 18.0 3.9 0.5 15.2 5.7 1.9 7.83/09E 25,808 1,474 7.1 -11.9 4.6 0.4 9.6 5.7 2.0 8.13/10E 35,220 1,987 9.1 34.8 3.6 0.4 11.1 6.1 1.7 7.8*Fully Diluted EPS? In 3QFY09, we expect Alok to post revenue of Rs6.6b, up 19.5% YoY, aided by higher capacities across all textilesegments.? EBITDA margin is likely to remain flat at 24.2% v/s 24.5% in 3QFY08.? In FY09, Alok announced several new initiatives, which include foray into real estate business and increased focus onthe retail business.? The management has drawn up restructuring plans, which include creating dedicated verticals for the textile andretail businesses. It has ambitious expansion plans for its domestic retail business, which entails introducing internationalbrands in India and opening ~500 H&A retail outlets over the next three years. Post restructuring, we expect Alok toemerge as a large retail play.? Alok is trading at inexpensive valuations of 4.6x FY09E EPS of Rs7.1 and 3.6x FY10E EPS of Rs9.1. We believe thereal estate vertical could lead to substantial value creation. We maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 4,189 4,648 5,508 7,248 5,434 6,981 6,581 6,811 21,593 25,808Change (%) 17.1 11.4 14.8 26.3 29.7 50.2 19.5 -6.0 18.1 19.5Total Expenditure 3,173 3,562 4,160 5,444 4,102 5,264 4,990 5,248 16,340 19,602EBITDA 1,016 1,086 1,348 1,804 1,333 1,718 1,591 1,563 5,253 6,205Change (%) 26.0 12.3 25.6 36.6 31.2 58.2 18.1 -13.3 26.0 18.1As % of Sales 24.2 23.4 24.5 24.9 23.8 24.6 24.2 22.9 24.3 24.0Depreciation 358 364 434 457 488 531 536 549 1,613 2,104Interest 270 283 295 365 413 515 554 569 1,213 2,051Other Income 2 139 89 -109 10 4 53 83 185 150Extra-ordinary 0 0 0 0 0 -31 0 0 1 -31PBT 785 579 707 873 442 677 554 528 2,944 2,201Tax 235 149 219 336 143 224 183 176 939 726Effective Tax Rate (%) 30.0 29.0 32.5 38.5 32.5 33.9 33.0 33.3 31.9 33.0Repoted PAT 550 430 488 537 298 422 371 352 2,005 1,443Change (%) 104.3 31.8 31.7 -31.7 -45.8 -1.9 -24.0 -34.5 41.3 -28.0Adj. PAT 285 430 488 646 298 453 371 352 1,674 1,474Change (%) 5.9 31.8 31.7 42.8 4.6 5.3 -24.0 -45.5 18.0 -11.9E: MOSL EstimatesSiddharth Bothra (Sbothra@MotilalOswal.com); Tel: +91 22 3982540731 December 2008264

Results PreviewSECTOR: TEXTILESArvind MillsSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGARVND INREUTERS CODEARMI.BO31 December 2008Previous Recommendation: NeutralNeutralRs18Equity Shares (m) 218.952-Week Range (Rs) 94/131,6,12 Rel.Per. (%) 26/-17/-28M.Cap (Rs b) 3.8M.Cap (US$ b) 0.1YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 18,449 1,196 0.8 -6.0 20.9 0.2 1.1 8.2 1.2 7.13/08A 22,713 274 1.3 55.6 13.4 0.2 1.5 4.4 1.0 7.73/09E 24,887 142 0.6 -48.1 27.1 0.2 0.7 5.2 0.9 8.73/10E 33,010 370 1.7 160.4 10.4 0.2 1.8 5.4 0.6 6.4? In 3QFY09, we expect Arvind to record revenue growth of 15.9% YoY to Rs6.2b, primarily driven by higher garmentsales.? Arvind is facing multiple cost pressure across all cost segments: i) cotton, ii) dyes and chemicals and iii) fuel costs.EBITDA margin is likely to decline 100bp YoY to 10.5% v/s 11.5% in 3QFY08.? We estimate Arvind to report net profit of Rs7m in 3QFY09 v/s reported profit of Rs65m in 3QFY08.? Arvind has covered its entire FY09 rupee exposure at ~Rs43.75. As per the Accounting Standard 30 issued by ICAI,Arvind had unrealized losses of Rs831m till 1QFY09, on account of instruments qualifying for hedge accounting. Thiscould be recognized in the P&L depending on when the underlying transactions transpire.? We do not expect domestic demand-supply equilibrium in the denim sector to emerge in the near to-medium term.Hence, we expect pressure on denim margins.? Arvind is currently working on restructuring plans, which could include relocating a part of its commodity gradedenim capacity to other countries and increasing its focus on branded apparel and garment manufacturing.? The stock trades at 27.1x FY09E EPS of Rs0.6 and 10.4x FY10E EPS of Rs1.7. We maintain Neutral.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 5,103 5,637 5,368 6,584 5,454 5,809 6,222 7,402 22,713 24,887Change (%) 21.3 14.3 19.9 36.3 6.9 3.0 15.9 12.4 23.1 9.6Total Expenditure 4,382 4,854 4,750 5,876 4,905 5,345 5,569 6,541 19,838 22,360EBITDA 721 783 619 708 549 465 653 861 2,875 2,528Change (%) -13.3 -6.4 -12.8 5.3 -23.9 -40.7 5.6 21.6 -5.8 -12.1As % of Sales 14.1 13.9 11.5 10.8 10.1 8.0 10.5 11.6 12.7 10.2Depreciation 355 351 352 309 294 293 324 359 1,366 1,271Interest 438 337 268 353 322 663 493 418 1,314 1,897Other Income 52 17 73 67 73 535 176 15 165 798Non Recurring Expense 83 0 -8 -55 39 -21 0 0 63 18PBT 63 112 63 58 44 22 12 99 296 176Tax 5 7 6 5 3 6 5 3 23 16Effective Tax Rate (%) 5.0 5.0 5.0 8.2 5.9 26.1 40.9 3.0 7.6 9.0Reported PAT 58 105 57 54 41 16 7 96 274 160Adj. PAT -24 105 65 109 2 37 7 96 337 142Change (%) -123.9 121.5 427.8 174.7 -110.2 -64.8 -89.5 -11.5 91.4 -57.8E: MOSL Estimates, * Restated Quarterly NumbersSiddharth Bothra (Sbothra@MotilalOswal.com); Tel: +91 22 3982540731 December 2008265

Results PreviewSECTOR: TEXTILESRaymondSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGRW INREUTERS CODERYMD.BO31 December 2008Previous Recommendation: NeutralNeutralRs107Equity Shares 61.452-Week Range 474/751,6,12 Rel.Per. (%) 25/-24/-23M.Cap (Rs. b) 6.6M.Cap (US$ b) 0.1YEAR NET SALES PAT* EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 20,407 949 15.5 -27.4 6.9 0.5 10.5 8.4 0.5 4.43/08E 22,830 649 10.6 -31.6 10.1 0.5 4.5 8.0 0.5 5.73/09E 24,813 577 9.4 -11.0 11.4 0.5 3.9 8.5 0.5 4.43/10E 28,037 1,040 16.9 80.2 6.3 0.4 6.9 10.3 0.4 3.6* Consolidated? We expect Raymond to report standalone revenue of Rs4b in 3QY09 v/s standalone revenue of Rs3.3b in 3QFY08.? EBITDA for 3QFY09 is likely to be around Rs546m v/s standalone EBITDA of Rs193m in 3QFY08. EBITDAmargin is expected at 13.4% v/s 5.8% in 3QFY08.? Raymond’s denim JV is facing cost pressures at its international plants in the US and Romania are operating at lowutilization rates of 70-75%.? Raymond expects to aggressively roll out 40-50 flagship stores in FY08. We feel these stores are unlikely to breakevenin the medium term due to high rentals. Management has given guidance for its branded apparel business to registerper annum growth rates of 20-25% over the next two to three years.? The stock trades at 11.4x FY09E consolidated EPS of Rs9.4 and 6.3x FY10E EPS of Rs16.9. Maintain Neutral.QUARTERLY PERFORMANCE (STANDALONE)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Sales 2,091 3,455 3,321 4,358 2,357 4,337 4,077 4,329 13,225 15,099Change (%) -25.5 na na na 12.7 25.5 22.8 -0.7 3.0 14.2Total Expenditure 2,132 3,185 3,128 3,943 2,747 3,834 3,531 3,704 12,388 13,816EBITDA -40 270 193 415 -390 502 546 625 837 1,283Change (%) -117.8 na na na 865.3 86.0 183.8 50.7 -50.9 53.4As % of Sales -1.9 7.8 5.8 9.5 -16.5 11.6 13.4 14.4 6.3 8.5Depreciation 172 216 212 211 203 206 213 229 811 851Interest 74 97 86 -1 91 166 172 210 255 639Other Income 348 372 237 92 274 137 110 91 1,049 612Extra-ordinary Income -21 -6 -5 -8 -4 10 0 0 -39 6PBT 62 329 132 297 -409 257 271 277 820 396Tax 5 22 39 27 7 14 29 51 93 101Effective Tax Rate (%) 8.1 28.0 31.0 9.1 -1.7 5.3 10.8 18.4 11.3 25.5Reported PAT 57 307 94 270 -416 243 242 226 727 295Adj. PAT after MI 77 313 99 277 -412 234 242 226 767 289Change (%) -38.6 na na na -632.6 -25.4 145.2 -18.5 -42.6 -62.3E: MOSL EstimatesSiddharth Bothra (Sbothra@MotilalOswal.com); Tel: +91 22 3982540731 December 2008266

Results PreviewSECTOR: TEXTILESVardhman TextilesSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGVTEX INREUTERS CODEMHSP.BO31 December 2008Previous Recommendation: BuyBuyRs59Equity Shares (m) 57.852-Week Range (Rs) 192/451,6,12 Rel.Per. (%) -3/-12/-13M.Cap (Rs. b) 3.4M.Cap (US$ b) 0.1YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 20,876 1,717 29.7 -12.5 2.0 0.3 16.6 9.3 0.9 5.23/08A 22,947 1,225 21.2 -28.6 2.8 0.3 10.6 6.0 1.3 8.23/09E 28,286 757 13.1 -38.3 4.5 0.3 6.2 5.0 1.1 7.33/10E 31,816 1,073 18.6 41.8 3.2 0.3 8.3 5.8 1.0 6.5Vardhman Textiles has issued a bonus of 1:2? For 3QFY09, Vardhman is likely to report revenue growth of 12% YoY to Rs6.8b. We expect EBITDA margin todecline 50bp to 14.2% v/s 14.7% in 3QFY08, primarily due to higher cotton prices.? Adjusted PAT is likely to register 71% YoY decline to Rs116m v/s Rs401m in 3QFY08, negatively impacted byincreased cotton prices, higher depreciation and rising interest cost.? Vardhman’s Rs26b capex plans are likely to be completed by March 2009. Till 2QFY08, the company commissioneda significant part of its Rs25b capex at Satlapur, MP, with 1,23,552 spindles, 310 looms and 40m meters of processingcapacity over FY08- 10E.? The stock is trading at 4.5x FY09E EPS of Rs13.1 and 3.2x FY10E EPS of Rs18.6. We maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 5,276 5,661 6,119 5,795 5,662 6,507 6,855 7,341 22,947 26,364Change (%) 10.9 7.1 12.5 7.3 7.3 14.9 12.0 26.7 9.9 23.3Total Expenditure 4,380 4,778 5,218 5,025 4,804 5,395 5,881 6,303 19,401 22,383EBITDA 896 883 901 770 858 1,111 973 1,038 3,546 3,981Change (%) 7.2 -3.7 -7.0 0.2 -4.3 25.9 8.1 34.9 1.6 17.6As % of Sales 17.0 15.6 14.7 13.3 12.2 17.1 14.2 14.1 15.5 15.1Depreciation 346 354 375 470 504 525 552 583 1,546 2,163Interest 165 131 125 218 285 315 320 311 639 1,230Other Income 72 116 94 156 36 100 70 54 329 260Extra-ordinary Income 0 0 0 0 1044 65 0 0 0 1,109PBT 457 514 494 237 105 307 172 198 1,690 782Tax 134 140 94 97 53 113 56 59 464 280Effective Tax Rate (%) 23.7 25.1 24.2 40.8 49.9 36.7 32.5 29.8 27.5 35.8Reported PAT 323 374 401 140 1,097 194 116 139 1,225 1,546Adj. PAT 323 374 401 140 53 129 116 139 1,225 437Change (%) -13.8 -11.6 -22.2 -62.0 -83.6 -65.5 -71.0 -0.9 -28.6 -38.3E: MOSL EstimatesSiddharth Bothra (Sbothra@MotilalOswal.com); Tel: +91 22 3982540731 December 2008267

Results PreviewQUARTER ENDING DECEMBER 2008UtilitiesBSE Sensex: 9,647 S&P CNX: 2,959 31 December 2008COMPANY NAMECESCNTPCPTC India3QFY09 performance reviewDuring 3QFY09, we expect companies in the utilities segment to report revenue growthof 20.9% YoY, EBIDTA growth of 8.1% YoY, and net profit growth of 1.7% YoY. Therobust revenue growth is driven by increase in tariff due to higher fuel cost, while EBIDTA/net profit growth is muted given delays in capacity addition and lower incentives.Reliance InfrastructureTata PowerGeneration up just 2.7% YoY, YTD PLF down 200bp YoYDuring April-November 2008, total electricity generation stood at 479BUs (v/s 466BUs),up 2.7% YoY, despite capacity addition of 9,263MW in FY08 (up 44% YoY). OverallPLF for the same period now stands at 74.7%, as compared to 76.7% YoY, a decline of200bp. This clearly reflects the overall fuel supply shortage, impacting power generation.The shortfall in PLF was highest in 1QFY09, and has recovered since then.200BP DECLINE IN PLF FOR APR-NOV, 08 PERIOD (%) MONTHLY PLF IN FY09 LOWER THAN FY08 LEVELS (%)80777477.774.776.71009080FY09FY08PLF in FY09 impacted dueto issues in terms of coalavailability and gridconstraints.717068FY03FY04FY05FY06FY07FY08Apr-Nov 08Apr-Nov 0760AprilMayJuneJulyAugustSeptemberOctoberNovemberDecemberJanuaryFebruaryMarchSource: CEAEXPECTED QUARTERLY PERFORMANCE SUMMARYRECO SALES EBITDA NET PROFIT(RS MILLION)DEC.08 CHG. (%) DEC.08 CHG. (%) DEC.08 CHG. (%)UtilitiesCESC Neutral 7,335 8.5 1,522 -1.8 840 -9.7NTPC Neutral 104,060 11.5 29,345 -1.2 19,490 -2.0PTC India Buy 13,134 79.0 61 272.7 263 324.8Reliance Infrastructure Buy 21,830 45.0 2,947 297.5 2,201 56.2Tata Power Neutral 18,452 30.0 3,598 34.2 1,396 -6.7Sector Aggregate 165,271 20.9 37,480 8.1 24,197 1.7Satyam Agarwal (Agarwals@MotilalOswal.com); Tel: +91 22 39825410/Nalin Bhatt (NalinBhatt@MotilalOswal.com); +91 22 3982542931 December 2008268

UtilitiesLower PLF is leading to decline in profitability for the generation companies (likely to beoffset by higher other income) due to 1) partial recovery of fixed charges and 2) lowerincentives gains. For NTPC, generation during April–November 2009 is lower by 2.6%YoY, despite capacity addition of 1,990MW in FY08 and 1HFY09. PLF for NTPC duringthis period has declined ~400bp to 86.2% in April-November 2008 v/s 90.2% YoY. Thecompany has been facing low coal inventory at various plants in past few months, whichhas impacted PLFs. In October 2008, NTPC’s 11 operating plants had coal inventory atsuper critical levels (less than 5 days) and 3 plants at critical level (between 5-10 days).MONTHLY PLF FOR NTPC IN FY09 LOWER THAN FY08 (%)~20,000MW CAPACITY WITH CRITICAL FUEL SUPPLY989286809196949088 898491FY0884 8389818683FY0993918795949418,00012,0006,000Capacity with coal at critical/super critical level% of total coal capacity24,00010075502574AprilJuneAugustOctoberDecemberFebruary0Sep-07Oct-07Nov-07Dec-07Jan-08Feb-08May-08Jul-08Aug-08Sep-08Oct-080Source: CEABase and peak deficit continue to inch up…All-India base and peak deficit continued to increase on the back of lower generation andslippages in capacity addition. Base deficit for April-November 2008 stood at 10.7% whilepeak deficit for the same period stood at 13.8%. During April-November 2008, the capacityaddition stood at 2,059MW v/s target of 8,471MW, an achievement of just 24%. Also, theflood like situation led to higher hydro power generation in FY08, leading to lower baseand peak deficit last year. We expect the base and peak deficits to remain high givendelays in terms of commissioning of new capacities.ALL-INDIA BASE (LEFT) AND PEAK (RIGHT) DEFICIT SCENARIO (%)15.0%12.0%9.0%6.0%3.0%JanuaryFebruaryMarchAprilCY07MayJuneJulyAugustCY08September11.3%October10.4%NovemberDecember18%14%10%6%2%JanuaryCY07CY08MarchIn Nov-08, the peakdeficit raise to 14.3%, a riseof 140bp from 12.9% in Nov-07.14.3%MayJulySeptember12.9%NovemberSource: CEA31 December 2008269

Utilities…leading to jump in short term power tariffThe rise in overall base and peak deficit for the period has lead to a significant jump inshort term power trading tariffs. During 2QFY09, tariff for the short term power tradingstood in the range of Rs4-9/unit v/s Rs2-5/unit in 2QFY08 and Rs6-9/unit in 1QFY08. Ofthe total units traded in 2QFY09, 39% of the units were traded in the range of Rs7-9/unit,while 54% of the units were traded in the range of Rs6-7/unit (total 93% in the band ofRs6-9/unit).TREND IN SHORT TERM TRADING OF POWER8-97-822341920Price Bands (Rs/unit)6-75-64-53-42-31-20.5 0.4 504431.746.9 2655.3 9.2 12.9 2412.5 76.6 39.814.354611QFY08 2QFY08 3QFY08 4QFY08 1QFY092QFY09Source: CEAFY09 capacity addition target to be missed; Eleventh Plan projectcommissioning back-endedFor FY09, capacity addition YTD stood at 2,059MW v/s target of 8,471MW, an achievementof just 24%. During the Eleventh Plan, capacity addition till date stands at 11,322MW v/starget 25,256MW, an achievement of just 44%. This clearly indicates significant delays interms of project commissioning.Given the delays, CEA has stated that the feasible capacity addition during FY09 stands at7,530MW v/s targeted 11,061MW, and for FY10 at 15,451MW from 18,034MW. Theentire reduction is due to delays in terms of commissioning of thermal power projects. Thishas led to bunching up of capacity addition in FY12 at 28,733MW, representing 36% of theplanned capacity in the Eleventh Plan.

UtilitiesCAPACITY ADDITION TARGET AS PER CEA AS OF NOVEMBER 2008 (MW)FY08 FY09 FY10 FY11 FY12 TOTALThermal Projects-Target 6,620 9,304 14,229 16,655 12,885 59,693-Feasible 6,620 5,773 11,646 16,572 20,292 60,903Hydro Projects-Target 2,423 1,097 1,805 1,741 8,561 15,627-Feasible 2,423 1,097 1,805 1,741 8,441 15,507Nuclear Projects-Target 220 660 2,000 500 0 3,380-Feasible 220 660 2,000 500 0 3,380Total Projects-Target 9,263 11,061 18,034 18,896 21,446 78,700-Feasible 9,263 7,530 15,451 18,813 28,733 79,790Source: CEAValuations and viewWe remain neutral on the sector given the rich valuations of incumbents, which also largelyfactors in the growth option.31 December 2008271

UtilitiesStock performance and valuationsSTOCK PERFORMANCE (%)ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARUtilitiesCESC -15 -62 10 -10 -14 -24NTPC 5 -28 30 25 6 11PTC India 7 -59 32 -6 8 -20Reliance Infrastructure -27 -73 -2 -20 -26 -34Tata Power -17 -49 8 3 -17 -11RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)110SensexMOSL Utilities Index120MOSL Utilities IndexSensex95908060653050Sep-08 Oct-08 Nov-08 Dec-080Dec-07 Mar-08 Jun-08 Sep-08 Dec-08COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)31.12.08 FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10E FY08 FY09E FY10EUtilitiesCESC 238 Neutral 26.4 29.3 26.1 9.0 8.1 9.1 10.9 9.4 8.8 13.0 12.8 10.3NTPC 181 Neutral 9.0 9.1 8.8 20.1 20.0 20.5 19.7 19.6 16.8 15.0 13.4 12.4PTC India 69 Buy 2.1 4.4 4.5 32.1 15.7 15.3 85.7 39.1 20.7 5.6 6.5 6.4Reliance Infrastructure 580 Buy 29.1 40.6 41.5 19.9 14.3 14.0 15.2 7.5 8.8 11.0 11.0 11.0Tata Power 748 Neutral 32.7 60.5 69.3 22.9 12.4 10.8 21.8 15.2 12.4 7.7 7.5 8.2Sector Aggregate 19.8 18.1 18.0 19.4 17.8 15.4 12.1 12.1 11.431 December 2008272

Results PreviewSECTOR: UTILITIESCESCSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGCESC INREUTERS CODECESC.BO31 December 2008Previous Recommendation: NeutralNeutralRs238Equity Shares (m) 124.952-Week Range 715/1651,6,12 Rel. Perf.(%) 14/-11/-10M.Cap. (Rs b) 29.7M.Cap. (US$ b) 0.6YEAR NET SALES PAT EPS* EPS* P/E* P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 24,843 2,257 28.2 30.9 8.4 1.2 13.5 12.2 1.6 7.003/08A 27,749 3,297 26.4 -6.4 9.0 1.2 13.0 11.8 1.3 6.503/09E 29,939 3,664 29.3 11.1 8.1 1.1 12.8 11.8 1.4 6.703/10E 32,874 3,257 26.1 -11.1 9.1 1.0 10.3 9.1 1.6 7.7* Excl Spencers; fully diluted? For 3QFY09, we expect CESC to post revenue of Rs7.3b, up 8.5% YoY, and net profit of Rs840m, down 9.7% YoY.? CESC expects 250MW Budge-Budge Expansion to be commissioned by September 2009. For 600MW Haldiaproject, land acquisition has been completed to the extent of ~75% and coal linkage has been obtained (from Mahanadifields). The management expects financial closure by February 2009 (delay of 4-5 months) due to issues of creditavailability. Project commissioning is targeted by September 2012, which is aggressive in our opinion.? CESC now plans to commission Haldia (600MW) project through a subsidiary company v/s in the books of CESC.Of the 600MW, 300MW is now intended to be on merchant basis, and 300MW will cater to the distribution businessof CESC with regulated returns.? We expect CESC to further invest Rs3.5b (vs/ Rs2.5 in FY08) as advance against share subscription in SpencerRetail during FY09, largely to fund cash losses (Rs200m/month currently), increased working capital requirementand capex plans. Management has re-worked its strategy for retail venture and plans to reduce the cash losses inFY10 by 50%.? We expect CESC to report standalone net profit of Rs3.7b in FY09 (up 11.1% YoY) and Rs3.3b in FY10 (down11.1% YoY), excluding Spencer.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 7,170 7,300 6,760 6,380 7,830 7,550 7,335 7,224 27,749 29,939Change (%) 6.4 8.1 14.0 16.6 9.2 3.4 8.5 13.2 11.5 7.9EBITDA 1,300 1,410 1,550 1,260 1,220 1,870 1,522 1,799 5,528 6,412Change (%) -4.4 0.7 24.0 7.7 -6.2 32.6 -1.8 42.8 6.7 16.0As of % Sales 18.1 19.3 22.9 19.7 15.6 24.8 20.8 24.9 19.9 21.4Depreciation 410 400 430 400 420 430 475 491 1,685 1,816Interest 390 340 330 310 320 350 355 354 1,364 1,379Other Income 430 380 270 420 590 310 285 314 1,554 1,499PBT 930 1,050 1,060 970 1,070 1,400 977 1,268 4,033 4,716Tax 110 120 130 110 130 160 137 210 476 637Effective Tax Rate (%) 11.8 11.4 12.3 11.3 12.1 11.4 14.0 16.5 11.8 13.5Reported PAT 820 930 930 860 940 1,240 840 1,059 3,557 4,079Adjusted PAT 680 810 930 860 825 940 840 1,059 3,297 3,664Change (%) 23.6 34.8 52.5 41.0 21.3 16.0 -9.7 23.1 48.2 14.7E: MOSL Estimates, Standalone Numbers (excl Spencers Retail)Satyam Agarwal (Agarwals@MotilalOswal.com); Tel: +91 22 39825410/Nalin Bhatt (NalinBhatt@MotilalOswal.com); +91 22 3982542931 December 2008273

Results PreviewSECTOR: UTILITIESNational Thermal Power CorporationSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGNTPC INREUTERS CODENTPC.BO31 December 2008Previous Recommendation: NeutralNeutralRs181Equity Shares (m) 8,245.552-Week Range 291/1131,6,12 Rel. Perf. (%) 7/48/25M.Cap. (Rs b) 1,492.4M.Cap. (US$ b) 30.7YEAR NET SALES PAT* EPS* EPS P/E P/BV ROE ROCE EV/ EV/END* (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 326,317 68,647 8.3 17.9 21.7 3.1 13.9 19.8 4.4 14.303/08A 370,910 75,688 9.0 8.0 20.1 2.8 15.0 20.8 3.9 12.703/09E 416,240 73,594 9.1 0.8 20.0 2.6 13.4 19.4 3.6 13.503/10E 432,934 72,823 8.8 -2.5 20.5 2.5 12.4 18.2 3.7 13.0* Pre Exceptional Earnings? We expect NTPC to report revenue of Rs104.1b (up 11.5% YoY) and net profit of Rs19.5b (down 2% YoY) in3QFY09.? NTPC is yet to award 3,760MW of projects for the Eleventh Plan and it has identified back-up projects of 3,000MW,which it plans to award by end FY09.? During FY09, capacity addition is expected at just 1,250MW (v/s initial target of 2,580MW), and represents ~7% ofexpected Eleventh Plan capacity addition. CEA has reported that 33% of the projects under construction (5,280MW)are delayed by 9-12 months. This increases the risk of slippages, given that 44% of the expected Eleventh Plancapacity addition will now be commissioned in FY12.? NTPC expects to commence production from Pakri Barwadih mines in FY10 v/s initial target of FY08. For othermining projects, NTPC has received mining plan approval from Ministry of Coal for Chatti-Bariatu (7m tons perannum) and Kerandari (6m tons per annum), and notification for land acquisition has been issued.? We estimate NTPC to report earnings CAGR of -1.8% over FY08-10E, driven largely by slower pace of capacityaddition, tightening incentive norms in FY10 and reduced interest income, given conversion of cash into CWIP/lowerinterest rates. We estimate FY09 profit at Rs73.6b (up 0.8% YoY) and Rs72.8b in FY10 (down -2.5% YoY).Maintain Neutral.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 89,697 80,169 93,308 107,436 95,395 96,614 104,060 120,171 386,350 416,240Change (%) 25.4 17.7 14.5 21.3 6.4 20.5 11.5 11.9 18.4 7.7EBITDA 26,945 27,490 29,691 28,222 24,218 25,476 29,345 28,317 114,131 107,356Change (%) 35.0 49.3 31.4 20.6 -10.1 -7.3 -1.2 0.3 13.1 -5.9As of % Sales 30.0 34.3 31.8 26.3 28.0 26.4 28.2 23.6 29.5 25.8Depreciation 4,914 5,134 5,266 6,071 5,524 5,267 5,793 6,098 22,060 22,681Interest 278 4,964 4,665 8,074 4,219 5,264 5,380 5,205 18,581 20,067Other Income 7,181 7,323 7,624 7,439 7,172 7,448 7,815 8,270 30,020 30,705PBT 28,934 24,715 27,384 21,516 21,647 22,394 25,987 25,285 103,510 95,312Tax 5,235 5,460 9,585 8,121 4,381 1,289 6,497 8,425 28,811 20,592Effective Tax Rate (%) 18.1 22.1 35.0 37.7 20.2 5.8 25.0 33.3 27.8 21.6Reported PAT 23,699 19,255 17,799 13,395 17,265 21,105 19,490 16,860 74,699 74,720Adjusted PAT (Pre Excep.l) 17,648 16,269 19,898 21,766 18,973 18,272 19,490 16,860 75,688 73,594Change (%) 15.2 12.9 14.3 17.4 7.5 12.3 -2.0 -22.5 15.2 -2.8E: MOSL EstimatesSatyam Agarwal (Agarwals@MotilalOswal.com); Tel: +91 22 39825410/Nalin Bhatt (NalinBhatt@MotilalOswal.com); +91 22 3982542931 December 2008274

Results PreviewSECTOR: UTILITIESPTC IndiaSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGPWTC INREUTERS CODEPTCI.BO31 December 2008Previous Recommendation: BuyBuyRs69Equity Shares (m) 227.452-Week Range 202/431,6,12 Rel. Perf.(%) 15/27/-6M.Cap. (Rs b) 15.6M.Cap. (US$ b) 0.3YEAR NET SALES PAT* EPS* EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 36,307 353 2.3 -13.7 29.4 3.9 13.8 17.7 0.3 35.103/08A 38,515 489 2.1 -8.4 32.1 1.0 5.6 6.5 0.4 85.703/09E 52,141 998 4.4 104.8 15.7 1.0 6.5 7.6 0.2 39.103/10E 75,834 1,024 4.5 2.6 15.3 1.0 6.4 7.8 0.1 20.7* Pre-exceptional? For 3QFY09, we expect PTC to report revenue of Rs13.1b, up 79% YoY, EBIDTA of Rs61m and net profit ofRs263m, up 325% YoY.? PTC has incorporated 100% subsidiary Viz. PTC Energy Ltd, which will act as project developer and invest equitystake in power projects. The company will not have conflict of business interest with PTC Financial Services, as itwould work as an independent NBFC.? PTC has entered into a JV with Bermaco group (74% stake) for developing projects on renewable energy and isworking on 12 projects of 12MW sanctioned by the state of Bihar government.? As of December 2008, PTC has signed power purchase agreements for 11,940MW of project capacity while it hassigned MoUs for a total 33,000MW of power capacity. It will have additional volume from 2,327MW of capacity tiedup on long term basis in FY10, which are likely to be commissioned.? We expect PTC to report net profit of Rs998m in FY09E (up 105% YoY) and Rs1,024m in FY10E (up 26% YoY).Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEPower Traded (MUs) 2,481 4,110 2,075 1,223 2,687 5,159 3,284 2,005 9,889 13,134Sales 11,586 14,672 7,338 5,466 12,031 20,313 13,134 6,663 39,062 52,141Change (%) 11.2 11.6 -9.1 -9.3 3.8 38.4 79.0 21.9 3.7 33.5EBITDA 58 103 16 28 59 141 61 38 205 298Change (%) -34.0 8.3 -80.2 -47.3 1.1 36.1 272.7 37.3 -35.5 45.3As of % Sales 0.5 0.7 0.2 0.5 0.5 0.7 0.5 0.6 0.5 0.6Depreciation 7 8 7 7 15 16 16 18 29 65Interest 3 6 6 1 9 8 9 9 17 35Other Income 97 64 75 194 176 281 270 239 429 965Extraordinary Income/(Expense) 0 0 0 -3 1 0 0 -1 -3 0PBT 144 154 77 215 211 398 306 250 591 1,163Tax 25 39 15 23 22 59 43 41 102 165Effective Tax Rate (%) 17.4 25.3 19.9 10.6 10.3 14.9 14.0 16.5 17.3 14.2Reported PAT 119 115 62 193 190 338 263 208 488 998Adjusted PAT 119 115 62 193 189 328 263 208 488 998Change (%) -0.8 33.3 -28.1 230.2 58.7 184.4 324.8 8.3 38.7 104.3E: MOSL EstimatesSatyam Agarwal (Agarwals@MotilalOswal.com); Tel: +91 22 39825410/Nalin Bhatt (NalinBhatt@MotilalOswal.com); +91 22 3982542931 December 2008275

Results PreviewSECTOR: UTILITIESReliance InfrastructureSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGRELE INREUTERS CODERLEN.BO31 December 2008Previous Recommendation: Under ReviewBuyRs580Equity Shares (m) 235.052-Week Range 2,632/3541,6,12 Rel. Perf. (%) 9/2/-20M.Cap. (Rs b) 136.2M.Cap. (US$ b) 2.8YEAR NET SALES PAT EPS* EPS P/E* P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/07A 56,930 8,015 34.1 23.1 17.0 1.5 10.2 8.7 1.5 17.73/08A 63,642 6,831 29.1 -14.8 19.9 1.3 11.0 9.7 1.3 15.33/09E 89,858 9,547 40.6 39.8 14.3 1.3 11.0 9.7 1.0 7.63/10E 97,847 9,761 41.5 2.2 14.0 1.2 11.0 9.7 0.9 8.8* Consolidated, Fully Diluted? For 3QFY09, we expect Reliance Energy to report revenue of Rs21.8b (up 45% YoY) and net profit of Rs2.2b, up56.2%YoY.? REL has emerged as the sole bidder for the 135-km Eastern peripheral expressway project on BOT basis. Projectcost is estimated at Rs26.8b and involves 6-lane expressway with access control highway connecting Faridabad,Noida, Ghaziabad and Sonepat, for a concession period of 20 years.? Reliance Infra Ventures currently has portfolio of 9 projects, comprising 5 Road projects in TN (Project cost Rs31.6b),2 Metro Rail projects in Mumbai and Delhi (Project cost Rs49b), Township project at Hyderabad (25msf, Projectcost Rs70b) and SEZ at DAKC, Navi Mumbai (45 acres, Project cost Rs7.5b). RIVs equity commitment towardsthese projects stand at Rs14.6b (excl 2 real estate projects), of which ~Rs1b has been invested.? Current order book of EPC division stands at Rs208b, comprising 7,460MW EPC power projects, BOP, ruralelectrification, etc. This will be further augmented by transmission projects (Rs22b) and EPC contracts for ~33,000MWof project portfolio for Reliance Power.? We expect RIL to report net profit of Rs9.6b in FY09E (up 39.8% YoY) and Rs9.8b in FY10E (up 2.2% YoY). Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QESales 16,384 15,631 15,055 16,419 22,903 24,732 21,830 20,394 64,484 89,858Change (%) 41.9 11.0 -1.8 1.7 39.8 58.2 45.0 24.2 60.4 39.3EBITDA 1,585 2,325 741 2,023 2,858 2,772 2,947 3,360 6,828 11,937Change (%) 18.8 31.0 -10.4 238.2 80.3 19.2 297.5 66.1 -6.9 74.8As of % Sales 9.7 14.9 4.9 12.3 12.5 11.2 13.5 16.5 10.6 13.3Depreciation 581 556 566 526 612 620 635 680 2,229 2,547Interest 693 854 854 686 774 653 850 1,267 3,088 3,544Other Income 2,391 2,070 3,479 2,220 1,103 2,016 2,185 2,868 10,006 8,172PBT 2,702 2,985 2,800 3,031 2,575 3,515 3,647 4,281 11,517 14,018Tax (incl contingencies) 485 484 -216 -83 49 626 656 771 671 2,103Effective Tax Rate (%) 18.0 16.2 -7.7 -2.7 1.9 17.8 18.0 18.0 5.8 15.0Reported PAT 2,216 2,501 3,016 3,113 2,525 2,890 2,991 3,510 10,846 11,916PAT (Pre Exceptionals) 2,216 1,515 1,409 3,551 2,502 2,122 2,201 2,721 6,831 9,547Change (%) 25.5 34.2 50.1 75.7 12.9 40.1 56.2 -23.4 16.2 39.8E: MOSL Estimates; Quarterly numbers are on standalone basisSatyam Agarwal (Agarwals@MotilalOswal.com); Tel: +91 22 39825410/Nalin Bhatt (NalinBhatt@MotilalOswal.com); +91 22 3982542931 December 2008276

Results PreviewSECTOR: UTILITIESTata PowerSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGTPWR INREUTERS CODETTPW.BO31 December 2008Previous Recommendation: BuyBuyRs748Equity Shares (m) 232.852-Week Range 1,641/5321,6,12 Rel. Perf.(%) 6/-1/3M.Cap. (Rs b) 174.3M.Cap. (US$ b) 3.6YEAR NET SALES PAT* EPS* EPS P/E* P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 47,153 5,538 26.1 21.7 28.7 2.7 9.5 4.8 3.6 23.303/08A 59,159 6,942 32.7 25.4 22.9 2.2 7.7 6.2 3.2 20.503/09E 75,618 14,084 60.5 85.2 12.4 1.8 7.5 8.2 2.7 15.003/10E 81,094 16,136 69.3 14.6 10.8 1.7 8.2 9.1 2.6 12.2* Consolidated including share of profit from Bumi Resources, Pre Exceptionals, Fully Diluted? For 3QFY09, we expect Tata power to report revenue of Rs18.5b (up 30% YoY), EBIDTA of Rs3.6b (up 34.2%YoY) and net profit of Rs1.4b (down 6.7% YoY).? Tata Power (TPWR) has achieved financial closure for all projects under development, and equity commitmenttowards 5,660MW projects under construction stands at ~Rs60b. Of this, it has already invested Rs6.5b, while itneeds additional Rs23.9b by FY10 and Rs24.5b beyond FY10.? Tata Sons has decided not to subscribe to the preferential allotment made in 2007 at a price of Rs1,341/sh, throughwhich Tata Power was planning to raise Rs19b to fund the equity commitment towards existing projects.? TPWR is expected to commission 2,663MW of capacity by FY12, including first unit of Mundra UMPP (800MW) inSeptember 2011. Despite the initial delays, capacity addition in FY09 is expected at 530MW and 120MW in FY10. InFY09, TPWR will have merchant capacity of 200MW, which should contribute 6.5% of standalone net profit in FY09and 18.6% in FY10.? We expect Tata Power to report consolidated net profit of Rs14.1b for FY09 and Rs16.1b in FY10 (including shareof profit from Bumi Resources).QUARTERLY PERFORMANCE (STANDALONE)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QETotal Operating Income 15,115 13,506 14,194 16,345 20,261 19,589 18,452 17,316 59,159 75,618Change (%) 9.8 12.5 18.2 39.5 34.0 45.0 30.0 5.9 19.8 27.8EBITDA 2,903 2,614 2,682 1,426 3,438 2,647 3,598 4,137 9,624 13,820Change (%) 12.5 4.7 27.2 -37.7 18.4 1.3 34.2 190.1 1.6 43.6As of % Sales 19.2 19.4 18.9 8.7 17.0 13.5 19.5 23.9 16.3 18.3Depreciation 714 709 705 777 731 763 900 1,106 2,905 3,500Interest 594 414 386 282 522 681 750 662 1,676 2,615Other Income 685 1,404 368 2,202 483 1,884 200 193 4,658 2,760PBT 2,279 2,895 1,960 2,568 2,668 3,087 2,148 2,562 9,701 10,465Tax 377 320 -13 318 763 468 752 1,007 1,002 2,990Effective Tax Rate (%) 16.5 11.1 -0.7 12.4 28.6 15.2 35.0 39.3 10.3 28.6Reported PAT 1,902 2,574 1,973 2,250 1,906 2,619 1,396 1,555 8,699 7,476Adjusted PAT 1,832 1,634 1,496 -23 1,517 1,830 1,396 1,555 4,940 6,318Change (%) 62.2 -2.8 24.2 -103.6 -17.2 12.0 -6.7 N.A. 6.1 27.9E: MOSL EstimatesSatyam Agarwal (Agarwals@MotilalOswal.com); Tel: +91 22 39825410/Nalin Bhatt (NalinBhatt@MotilalOswal.com); +91 22 3982542931 December 2008277

Results PreviewSECTOR: AIR-CONDITIONERSBlue StarSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGBLSTR INREUTERS CODEBLUS.BO31 December 2008Previous Recommendation: BuyBuyRs152Equity shares (m) 89.952-Week Range 548/2341, 6, 12 Rel. Perf. (%) -4/-31/-18M. Cap. (Rs b) 13.7M. Cap. (US$ b) 0.281YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 16,013 712 7.9 45.6 36.9 36.103/08A 22,330 1,468 16.3 106.2 9.3 5.2 73.1 58.5 0.6 6.003/09E 28,741 1,838 20.4 25.2 7.4 3.7 58.1 64.3 0.5 5.203/10E 37,046 2,377 26.4 29.3 5.8 2.7 54.3 57.8 0.4 4.0? Blue Star’s total order book at the beginning of 3QFY09 was Rs15.5b, up 51% YoY.? Though order book is strong, the company is cautious of order book execution. It has taken up for execution onlythose projects from which it does not expect payment problems.? Accordingly, we have factored in lower topline growth of 25% YoY to Rs6.4b.? We have maintained our margin estimates at 2Q levels of 10.7%. Easing off of commodity prices should be partlyoffset by sharp depreciation of the rupee, leading to higher cost of imported components.? Factoring in normal increase in depreciation and interest cost, we expect PAT of Rs418m, up 18% YoY? We maintain our EPS estimate for FY09 at Rs20.4 and for FY10 at Rs26.4. The stock trades at a P/E of 7.4x FY09Eand 5.8x FY10E. We maintain Buy with a target of Rs396 (15x FY10E), 161% upside from current levels.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEOperating Income 4,623 5,478 5,149 7,081 6,309 6,465 6,436 9,531 22,330 28,741Change (%) 48.0 45.7 39.1 30.4 36.5 18.0 25.0 34.6 39.5 28.7Total Expenses 4,243 4,794 4,592 6,357 5,739 5,776 5,746 8,527 19,985 25,787EBITDA 379 684 557 725 570 690 690 1,004 2,345 2,954Change (%) 139.4 108.4 134.3 63.0 50.4 0.8 23.8 38.5 100.6 26.0EBITDA Margin (%) 8.2 12.5 10.8 10.2 9.0 10.7 10.7 10.5 10.5 10.3Depreciation 50 52 55 62 57 61 70 99 220 287Interest 22 16 16 22 20 44 45 45 76 154Other Income 1 8 1 7 17 12 5 7 17 40Extraordinary Inc/ (Exp) 0 0 0 353 0 0 0 0 353 0PBT 308 624 487 1,001 510 596 580 866 2,420 2,553Tax 85 164 133 297 146 147 162 259 679 715Tax/PBT (%) 27.5 26.3 27.3 29.7 28.6 24.6 28.0 29.9 28.1 28.0Reported PAT 223 460 354 704 364 449 418 607 1,741 1,838Adjusted PAT 223 460 354 430 364 449 418 607 1,468 1,838Change (%) 205.8 149.8 208.2 26.7 63.1 -2.2 17.9 40.9 106.2 25.2PAT Margin (%) 4.8 8.4 6.9 6.1 5.8 7.0 6.5 6.4 6.6 6.4E: MOSL EstimatesShrinath Mithanthaya (ShrinathM@MotilalOswal.com); Tel: +91 22 3982 542131 December 2008278

Results PreviewSECTOR: TEXTILESBombay RayonSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGBRFL INREUTERS CODEBRFL.BO31 December 2008Previous Recommendation: BuyBuyRs125Equity shares (m) 63.052-Week Range 418/971, 6, 12 Rel. Perf. (%) -11/-27/-13M. Cap. (Rs b) 7.9M. Cap. (US$ b) 0.2YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 4,894 544 8.6 133.8 17.1 15.303/08A 10,891 1,146 18.2 110.5 6.9 1.3 22.7 16.8 1.5 7.103/09E 15,906 1,972 28.5 57.0 4.4 1.0 26.3 15.4 1.6 6.803/10E 22,770 2,753 39.8 39.6 3.1 0.7 26.8 16.3 1.2 4.6? In November 2008, Bombay Rayon received high court approval for the merger of Leela Scottish Lace effectivefrom 1 October 2007. Accordingly 3QFY08 numbers are of the merged entity. However, quarterly numbers will notadd up to the full year as the first two quarters do not include Leela figures.? In October 2008, Bombay Rayon completed acquisition of the GURU brand and retail for a consideration of €26.5m.This is lower than the original contracted price of €33m, as the selling firm, Jam Session Holdings, Italy, went intoliquidation.? The company’s capacities are sold out until April 2009. This is mainly due to significant shift in garments demandfrom China to India, led by currency and labor cost differentials.? For 3QFY09, we estimate sales of Rs3.86b, up 58% YoY, and PAT of Rs489m, up 41% YoY.? We value Bombay Rayon standalone (including merged Leela Lace) at 10x FY10E to arrive at a value of Rs398. Wevalue GURU at Rs74 based on DCF. Our SOTP value of Rs472 offers 278% upside from current levels. Wemaintain Buy.QUARTERLY PERFORMANCE- STANDALONE (INCLUDING ERSTWHILE LEELA LACE FROM 3QFY09 - SEE NOTE)(RS MILLION)Y/E MARCH FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEOperating Income 2,013 2,324 2,438 2,542 2,751 2,870 3,859 5,871 9,317 15,906Change (%) 147.8 125.1 85.2 46.7 36.7 23.5 58.3 130.9 90.4 70.7Total Expenses 1,617 1,754 1,858 1,917 2,116 2,184 2,949 4,585 7,146 12,206EBITDA 396 570 579 625 635 687 910 1,286 2,171 3,701Change (%) 158.1 185.9 111.0 113.8 60.4 20.4 57.1 105.6 136.0 70.5EBITDA Margin (%) 19.7 24.5 23.8 24.6 23.1 23.9 23.6 21.9 23.3 23.3Depreciation 65 66 76 112 93 96 130 206 319 540Interest 54 67 77 61 74 108 137 167 258 566Other Income 13 16 16 50 13 16 18 24 96 70Extraordinary inc/ (exp) 26 0 0 0 0 0 0 0 26 0PBT 317 454 442 503 481 498 661 938 1,716 2,665Tax 97 147 96 165 132 131 172 244 505 693Tax/PBT (%) 30.4 32.4 21.8 32.7 27.4 26.3 26.0 26.0 29.4 26.0PAT 221 307 346 338 349 367 489 694 1,211 1,972Adjusted PAT 194 307 346 338 349 367 489 694 1,185 1,972Change (%) 141.7 176.8 151.2 57.1 80.0 19.6 41.4 105.0 117.8 66.5PAT Margin (%) 9.6 13.2 14.2 13.3 12.7 12.8 12.7 11.8 12.7 12.4E: MOSL Estimates; Note: The company expects to report Leela Lace numbers from 3QFY09. However, the Leela merger is with retrospectiveeffect from 1QFY09. So, sum of the quarters do not add up to the full year numbersShrinath Mithanthaya (ShrinathM@MotilalOswal.com); Tel: +91 22 3982 542131 December 2008279

Results PreviewEverest Kanto CylindersSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGEKCL INREUTERS CODEEKCL.BO31 December 2008Previous Recommendation: BuyBuyRs181Equity shares (m) 101.252-Week Range 385/1291, 6, 12 Rel. Perf. (%) 24/-4/5M. Cap. (Rs b) 18.3M. Cap. (US$ b) 0.4YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 4,251 718 7.4 95.5 31.7 34.803/08A 5,287 1,064 10.5 43.1 17.2 3.8 27.2 24.1 3.9 13.603/09E 9,575 1,557 14.7 39.3 12.4 2.5 25.0 23.0 2.4 8.403/10E 12,978 2,275 21.4 46.1 8.5 2.0 26.3 24.8 1.7 6.0? Everest Kanto is expanding capacities in a timely manner to ride the booming global demand for CNG cylinders. Itrecently commissioned its China unit with a capacity of 200,000 cylinders. Further, it plans to commence commercialproduction at Gandhidham (billet-piercing technology and jumbo cylinders) before end-FY09, and at Kandla SEZ(plate-based cylinders) in September 2009.? In 3QFY08, Everest Kanto announced a 50:50 JV with Tomasetto Achilles group of Argentina for forward integrationinto CNG kits. Tomasetto claims to be a world leader in CNG kits and components, and the JV has a huge opportunityin India, currently catered to by small and highly fragmented players. Everest Kanto will invest Rs75-100m in theventure.? The credit crunch has led to some slowdown in auto CNG cylinders in India. However, the company expects to offsetthis by higher sale in other countries viz China, Iran, Pakistan, Argentina etc.? For 3QFY09, we expect consolidated sales (including CP Industries) of Rs2.4b, up 89% YoY, EBITDA margin of28%, and PAT of Rs356m, up 22% YoY.? The stock is trading at 12.4x FY09E, and 8.5x FY10E consolidated earnings. We believe Everest Kanto’s highgrowth with healthy RoE will sustain rich valuation. We maintain Buy with a target of Rs430 (20x FY10E).QUARTERLY PERFORMANCE (CONSOLIDATED)(RS MILLION)Y/E MARCH FY08 FY09* FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QENet Income 1,113 1,277 1,255 1,642 1,892 2,210 2,372 3,102 5,287 9,575Change (%) 39.9 27.6 12.3 22.9 69.9 73.0 88.9 88.9 24.4 81.1Total Expenses 805 885 796 1,275 1,281 1,508 1,708 2,330 3,761 6,800EBITDA 314 411 460 366 619 720 664 772 1,550 2,775Change (%) 41.9 56.2 44.4 6.9 97.3 75.2 44.5 110.8 35.4 79.0EBITDA Margin (%) 28.2 32.2 36.6 22.3 32.7 32.6 28.0 24.9 29.3 29.0Depreciation 43 49 83 39 121 156 160 177 215 614Interest 16 22 29 4 100 47 75 87 71 309Other Income 4 1 25 12 23 12 6 10 42 50Extraordinary inc/ (exp) 0 12 3 -36 0 0 0 0 -21 0PBT 258 353 375 299 421 528 435 518 1,285 1,902Tax 36 69 80 57 71 96 79 98 243 345Tax/PBT (%) 14.0 19.6 21.4 19.1 16.9 18.2 18.1 19.0 18.9 18.1PAT 222 284 294 242 350 432 356 419 1,043 1,557Adjusted PAT 222 272 292 278 350 432 356 419 1,064 1,557Change (%) 93.7 99.9 43.2 5.8 57.6 58.8 22.1 50.7 48.3 46.4PAT Margin (%) 20.0 21.3 23.2 16.9 18.5 19.5 15.0 13.5 20.1 16.3E: MOSL Estimates; * FY09 numbers include CP Industries acquired during March 2008 and hence not comparable with previous year.Shrinath Mithanthaya (ShrinathM@MotilalOswal.com); Tel: +91 22 3982 542131 December 2008280

Results PreviewSECTOR: OIL DRILLING & ALLIED SERVICESGreat OffshoreSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGGOFF INREUTERS CODEGOFS.BO31 December 2008Previous Recommendation: BuyBuyRs220Equity Shares (m) 37.152-Week Range 1,150/2001, 6 Rel. Perf. (%) -18/-29/-24M. Cap. (Rs b) 8.2M. Cap. (US$ b) 0.2YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 5,901 1,452 38.1 49.5 23.5 14.703/08A 7,959 1,694 44.4 16.7 5.0 1.1 27.6 14.5 2.0 4.503/09E 10,646 1,983 53.4 20.2 4.1 1.2 32.2 12.1 2.6 5.803/10E 14,191 1,876 50.5 -5.4 4.4 1.2 31.3 15.9 1.8 4.1? The impact of recent developments at Great Offshore will begin to be felt from 3QFY09:(1) Completion of KEI-RSOS acquisition effective 5 November 2008(2) Charter of construction barge (Gal Constructor) along with AHT from 5 November 2008(3) Charter of flat cargo carrier (Malaviya Thirty-Three) along with AHT from 25 November 2008(4) Resumption of two PSVs and one MSV, which were under dry-dock in 2QFY09(5) Commencement of work on the Rs2.34b engineering contract with ONGC.? Considering all that is stated above, and a weaker rupee for FY09 (Rs45.6 v/s Rs45 earlier), we revise our FY09 EPSupward by 9% to Rs53.4.? However, there is a delay in the delivery of Great Offshore’s new-build MSV to the end of 2009 v/s April-May 2009earlier. As a result, we revised our FY10 EPS downward by 8% to Rs50.5.? At P/E of 4x FY09E and FY10E, we believe Great Offshore’s valuations are undemanding. Our DCF-based targetprice of Rs660 offers 200% upside from current levels. We maintain Buy.QUARTERLY PERFORMANCE(RS MILLION)Y/E MARCH FY08 (STANDALONE) FY09 (CONSOLIDATED) FY08 FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QE CONS. CONS.Total Income 1,740 1,697 2,017 1,870 2,577 2,205 2,846 3,018 7,573 10,646Change (%) 50.2 32.6 35.4 23.1 N.A. N.A. N.A. N.A. 34.9 40.6Total Expenses 810 801 928 1,120 1,288 1,378 1,580 1,665 4,449 5,911EBITDA 930 896 1,088 750 1,288 827 1,267 1,353 3,124 4,735Change (%) 51.1 41.4 49.5 6.1 N.A. N.A. N.A. N.A. 33.9 51.6EBITDA Margin (%) 53.4 52.8 54.0 40.1 50.0 37.5 44.5 44.8 41.3 44.5Depreciation 236 231 263 255 280 320 380 420 986 1,400Interest 136 145 211 163 179 177 240 296 684 892Extraordinary Inc/ (Exp) 207 83 18 180 0 0 0 0 235 0PBT 557 519 615 512 829 330 647 637 1,690 2,443Tax -4 23 64 88 106 38 75 64 173 284Tax/Adj. PBT (%) -0.8 4.4 10.4 17.2 12.8 11.6 11.6 10.0 10.3 11.6Reported PAT 562 496 551 424 723 292 572 573 1,516 2,159Adjusted PAT * 562 496 551 156 723 292 572 397 1,194 1,983Change (%) 60.0 27.9 46.8 -47.8 N.A. N.A. N.A. N.A. 16.7 66.1PAT Margin (%) 32.3 29.2 27.3 8.4 28.1 13.2 20.1 13.2 15.8 18.6E: MOSL Estimates; * Adjusted PAT is net of extraordinary items and preference dividend (including dividend tax)Shrinath Mithanthaya (ShrinathM@MotilalOswal.com); Tel: +91 22 3982 542131 December 2008281

Results PreviewSECTOR: ENGINESGreaves CottonSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGGRV INREUTERS CODEGRVL.BO31 December 2008Previous Recommendation: BuyBuyRs73Equity shares (m) 48.852-Week Range 466/651, 6, 12 Rel. Perf. (%) -6/-30/-29M. Cap. (Rs b) 3.6M. Cap. (US$ b) 0.1YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA06/07A 10,867 1,216 24.9 63.3 48.0 47.706/08A 11,898 950 19.5 -21.9 3.8 1.0 31.7 35.1 0.2 2.006/09E 13,117 787 16.1 -17.2 4.5 0.9 20.4 29.6 0.2 2.406/10E 15,424 950 19.5 20.8 3.8 0.8 21.8 34.5 0.2 1.9? In October 2008, Greaves Cotton announced a long-term agreement with Tata Motors to develop a new light dieselengine for small commercial vehicles. This engine may take 12 months to be launched.? Meanwhile, Greaves Cotton’s leading two-wheeler engine customer, Piaggio, has suffered a setback in 1HFY09 –volumes are down 4% YoY, for the first time in the last several years. Our numbers factored in 8% growth forPiaggio, which we have now reduced to 0%.? Likewise, we have lowered Greaves’ twin-cylinder engine volumes from 12,000 to 6,000 for FY09 and from 18,000to 12,000 for FY10. This is because of no announcement from Piaggio regarding the launch of Ape Truk Plus,wherein these engines will be fitted.? As a result of the above, we downgrade our sales estimates for FY09 and FY10 by 9% and PAT estimates by 21%.? The stock is currently trading at a P/E of less than 5x FY09E EPS. We value Greaves at 8x FY10E EPS. Wemaintain Buy with a revised target price of Rs156 (Rs199 earlier), 114% upside from current levels.QUARTERLY PERFORMANCE (STANDALONE)(RS MILLION)Y/E JUNE FY08 FY09 FY08 FY09E1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE CONS. CONS.Net Sales* 2,726 3,004 2,998 2,820 3,066 3,275 3,383 2,942 11,898 13,117Change (%) 9.5 5.9 4.9 13.5 12.5 9.0 12.8 4.3 9.5 10.2Total Expenses 2,377 2,575 2,559 2,452 2,661 2,869 2,954 2,637 10,309 11,561EBITDA 350 429 439 369 405 406 430 305 1,588 1,556Change (%) -11.5 -9.4 -8.2 34.9 15.9 -5.5 -2.2 -17.3 -2.6 -2.1EBITDA Margin (%) 12.8 14.3 14.6 13.1 13.2 12.4 12.7 10.4 13.3 11.9Depreciation 50 51 54 53 58 65 70 55 237 258Interest 55 49 33 64 59 61 61 63 238 254Other Income 25 21 32 16 15 35 40 15 110 105Extraordinary Inc/ (Exp) 0 0 36 72 0 0 0 0 108 0PBT 270 350 420 340 303 315 338 202 1,331 1,149Tax 32 56 116 76 97 99 107 64 289 362Tax/PBT (%) 11.8 15.9 27.5 22.2 32.1 31.5 31.5 31.5 21.7 31.5Reported PAT 238 295 305 265 206 216 232 138 1,042 787Adjusted PAT 238 295 269 193 206 216 232 138 950 787Change (%) -3.1 -1.2 -20.8 -43.4 -13.4 -26.8 -13.7 -28.2 -21.9 -17.2PAT Margin (%) 8.7 9.8 9.0 6.8 6.7 6.6 6.9 4.7 8.0 6.0E: MOSL Estimates; * net of estimated exciseShrinath Mithanthaya (ShrinathM@MotilalOswal.com); Tel: +91 22 3982 542131 December 2008282

Results PreviewSECTOR: AGROCHEMICALSUnited PhosphorusSTOCK INFO.BSE Sensex: 9,647S&P CNX: 2,959BLOOMBERGUNTP INREUTERS CODEUNPO.BOEquity Shares (m) 439.352-Week Range (Rs) 213/651,6,12 Rel. Perf. (%) 26/5/14M.Cap. (Rs b) 47.3M.Cap. (US$ b) 1.0QUARTERLY PERFORMANCE (CONSOLIDATED)31 December 2008Previous Recommendation: BuyYEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/07A 24,710 2,884 7.2 34.5 14.9 1.3 20.8 13.9 2.4 10.703/08A 37,617 3,954 7.7 7.1 13.9 1.1 21.2 15.8 1.4 7.903/09E 49,713 5,534 10.8 40.0 10.0 1.7 22.3 20.2 1.0 5.703/10E 55,081 7,217 14.1 30.4 7.6 1.4 24.0 21.4 0.8 4.5Excluding Advanta & Cerexagri(RS MILLION)Y/E MARCH FY08* FY09 FY08* FY09E1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QEGross Revenues 8,450 8,867 8,094 12,206 13,141 11,648 10,215 14,490 37,617 49,713YoY Change (%) 75.9 71.5 67.2 23.3 55.5 31.4 26.2 18.7 52.2 32.2Total Expenditure 6,754 7,123 6,628 9,745 10,484 9,407 8,274 11,504 30,250 39,669EBITDA 1,697 1,743 1,466 2,461 2,657 2,242 1,941 2,986 7,367 10,044Margins (%) 20.1 19.7 18.1 20.2 20.2 19.2 19.0 20.6 19.6 20.2Depreciation 505 503 487 28 378 455 465 472 1,522 1,769Interest 320 331 294 743 634 600 360 368 1,688 1,962PBT before EO Expense 872 910 685 1,689 1,645 1,187 1,116 2,146 4,156 6,313Extra-Ord Expense 0 0 0 1,144 0 0 0 0 1,144 0PBT after EO Expense 872 910 685 546 1,645 1,187 1,116 2,146 3,013 6,313Tax 139 10 22 -10 99 59 312 98 161 821Deferred Tax 0 102 179 -18 92 21 45 79 263 253Rate (%) 15.9 12.3 29.4 -5.2 11.6 6.7 32.0 8.2 14.1 17.0Reported PAT 733 798 484 574 1,454 1,108 759 1,969 2,589 5,240Income from Associate Co 4 85 2 131 22 113 36 124 222 294Adjusted PAT 738 883 485 1,848 1,477 1,220 794 2,093 3,954 5,534YoY Change (%) 36.5 34.5 36.1 38.4 100.1 38.3 63.6 13.2 37.1 40.0Margins (%) 8.7 10.0 6.0 15.1 11.2 10.5 7.8 14.4 10.5 11.1E: MOSL Estimates; *Excludes Cerexagri’s restructuring costBuyRs108? United Phosphorus (UPL) is expected to report 26% YoY growth in consolidated revenues to Rs10.2b, drivenprimarily by 22% growth in domestic business and 28% growth in international business. We estimate some moderationin volumes along with pricing as benefits of lower input cost, should they be passed on.? EBITDA margin is expected to improve by 90bp to 19%, benefiting from recent price hikes of end products. However,higher interest cost (up 22%) coupled with higher tax provisioning would restrict PAT growth to 64% YoY to Rs794m.PAT growth is aided by lower amortization on account of write-off of product registrations/knowhow cost againstreserves.? With decline in agri-commodity prices globally, we expect volumes to moderate from the high levels witnessed in1HFY09. This coupled with pass through of the input cost benefit, would result in lower revenue growth. As a result,we are revising our EPS estimates downward by 5.6% to Rs10.8 for FY09E and by 9.7% to Rs14.1 for FY10E.? The improvement in financial performance driven by synergies of integration with Cereagri and deployment of fundsin business (as it would impact EPS and return ratios in the interim) would act as catalyst for stock performance.Valuations at 10x FY09E EPS (fully diluted) and 5.7x EV/EBITDA, do not reflect growth potential (both organic andinorganic) for the company. Maintain Buy.Jinesh K Gandhi (Jinesh@MotilalOswal.com); Tel +91 22 3982541631 December 2008283

THIS SPACE IS INTENTIONALLY LEFT BLANKNote: In our quarterly performance tables, our four-quarter numbers may not always add up to the full-year numbers. This is because ofdifferences in classification of account heads in the company’s quarterly and annual results or because of differences in the way weclassify account heads as opposed to the company.31 December 2008284

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NOTES31 December 2008286

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Results PreviewThis report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. Motilal OswalSecurities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solelyfor your information and should not be reproduced or redistributed to any other person in any form.The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon such. MOSt orany of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the informationcontained in this report. MOSt or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matterpertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement. The recipients ofthis report should rely on their own investigations.MOSt and/or its affiliates and/or employees may have interests/ positions, financial or otherwise in the securities mentioned in this report. To enhance transparency,MOSt has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report.Disclosure of Interest StatementFor more copies or other information, contactInstitutional: Navin Agarwal. Retail: Manish ShahPhone: (91-22) 39825500 Fax: (91-22) 22885038. E-mail: inquire@motilaloswal.comMotilal Oswal Securities Ltd, 3rd Floor, Hoechst House, Nariman Point, Mumbai 400 021The MOSt group and its Directors own shares in the following companies covered in this report: Bharat Electronics, Bharti Airtel, Birla Corporation, GSK Pharma,Hero Honda, Hindalco, IOC, Marico, Oriental Bank, Siemens, State Bank.MOSt has broking relationships with a few of the companies covered in this report.MOSt is engaged in providing investment-banking services in the following companies covered in this report: Alok Industries and Great Offshore.This information is subject to change without any prior notice. MOSt reserves the right to make modifications and alternations to this statement as may be requiredfrom time to time. Nevertheless, MOSt is committed to providing independent and transparent recommendations to its clients, and would be happy to provideinformation in response to specific client queries.31 December 2008288